Value of $Value of $

Econ 203/Brian GoffEcon 203/Brian Goff

Department of EconomicsDepartment of Economics

Western Kentucky UniversityWestern Kentucky University

$760M in 2009 $ $190M in 1939 $2005 $

$25 in 1978

CPI = 67.5

$50 in 1989

CPI = 125

$100 in 2012

CPI = 225

INFLATIONINFLATION

Inflation (on an annual basis) is the Inflation (on an annual basis) is the percent change in the average price percent change in the average price level for the yearlevel for the year

Monthly Inflation = 100% x (CPI now – CPI last month)/ CPI Monthly Inflation = 100% x (CPI now – CPI last month)/ CPI last monthlast month

Annualized = x 4 Annualized = x 4

U.S. Inflation Since 1960U.S. Inflation Since 1960

Effects of InflationEffects of Inflation

Effects of inflation:Effects of inflation: $10 item after 1 year of inflation @$10 item after 1 year of inflation @

2% = $10.202% = $10.20 10% = $1110% = $11 100% = $20100% = $20 1000% = $1101000% = $110 10,000% = $110010,000% = $1100 1 million % = 1 million % =

Formula is P*(1 + decimal inflation rate)Formula is P*(1 + decimal inflation rate)

INFLATION TOP 10 INFLATION TOP 10

(cia world fact book, 2008)(cia world fact book, 2008)

Uzbekistan Uzbekistan 16.00 16.00 2007 est. 2007 est. Afghanistan 16.30 16.30 2005 est. 2005 est. Iran 17.00 17.00 2007 est. 2007 est. Sao Tome 17.00 17.00 2007 est.2007 est.Congo 18.20 18.20 2006 est. 2006 est.

Guinea Guinea 20.00 20.00 2007 est. 2007 est.

Venezuela Venezuela 20.70 20.70 2007 est. 2007 est.

Burma Burma 39.50 39.50 2007 est. 2007 est.

Zimbabwe Zimbabwe 26,47026,470 2007 est.2007 est.

Factors influencing inflation:Factors influencing inflation:

Supply and Demand for MoneySupply and Demand for Money

Inflation = % Change Money Supply Inflation = % Change Money Supply

+ % Change in Velocity + % Change in Velocity of Moneyof Money

- % Change in real - % Change in real income income

www.thebulliondeskwww.thebulliondesk In US $ = 1717In US $ = 1717 In Euro = 1310 = In Euro = 1310 =

$1716$1716 In GBP = 1100 = In GBP = 1100 =

$1716$1716 In AUD = 1613 = In AUD = 1613 =

$1710$1710