Understanding Inflation and Price Levels
Explore the concept of inflation, deflation, and price levels through engaging visuals and historical data. Discover why prices may not always align with changes in the inflation rate. Delve into the economic factors influencing price movements and consumer trends. Learn about the impact of inflation on purchasing power and the economy as a whole.
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Presentation Transcript
The Inflation Rate Is Falling but Prices Are Not Lesson & Classroom Activity 1 FEDERAL RESERVE EDUCATION | FRE.ORG
Compelling Question If the inflation rate is falling, why aren't prices falling? 2 FEDERAL RESERVE EDUCATION | FRE.ORG
What was the cost of a McDonald's burger in the 1970s? 3 FEDERAL RESERVE EDUCATION | FRE.ORG
Inflation, Deflation Inflation A general, sustained upward movement of prices for goods and services in an economy. Average level of prices in an economy is increasing. Deflation A general, sustained downward movement of prices for goods and services in an economy. Average level of prices in an economy is decreasing. 4 FEDERAL RESERVE EDUCATION | FRE.ORG
Inflation Rate, Price Level Inflation rate The percentage increase in the average price level of goods and services over a period of time. Price level A weighted average of the prices of goods and services in the economy, such as the consumer price index. 5 FEDERAL RESERVE EDUCATION | FRE.ORG
The inflation rate is falling but (the average level of) priceshave not. 6 FEDERAL RESERVE EDUCATION | FRE.ORG
1980-1983 View interactive graph Inflation Rate 7 FEDERAL RESERVE EDUCATION | FRE.ORG
1980-1983 View interactive graph Inflation Rate Consumer Price Index View interactive graph 8 FEDERAL RESERVE EDUCATION | FRE.ORG
A graph of a graph Inflation Rate Description automatically generated with medium confidence View interactive graph 9 FEDERAL RESERVE EDUCATION | FRE.ORG
A graph of a graph Inflation Rate Description automatically generated with medium confidence View interactive graph A graph of a growing graph Description automatically generated with medium confidence Price Level View interactive graph 10 FEDERAL RESERVE EDUCATION | FRE.ORG
Disinflation vs. Deflation Deflation A general, sustained downward movement of prices for goods and services in an economy. Disinflation A decrease in the inflation rate or a slowdown in the upward movement of prices for goods and services in the economy. Inflation rate is decreasing. Inflation rate is negative. Price index is falling. The growth rate of the price index is negative. Price index is still increasing. The rate at which inflation is occurring has slowed. The growth rate of the price index has decreased. 11 FEDERAL RESERVE EDUCATION | FRE.ORG
Inflation vs. Disinflation vs. Deflation 12 FEDERAL RESERVE EDUCATION | FRE.ORG
Check for understanding! 13 FEDERAL RESERVE EDUCATION | FRE.ORG
What is inflation? What is deflation? What is disinflation? How are the price level and inflation rate Closing related? How are the price level and inflation rate different? What is the difference between deflation and disinflation? 14 FEDERAL RESERVE EDUCATION | FRE.ORG FEDERAL RESERVE EDUCATION | FRE.ORG
