chapter+13.2

Notes
 * inflation- a general increase in prices
 * purchasing power- the ability to purchase goods and services
 * price index- a measurement that shows how the average price of a standard group of goods changes over time
 * market basket- a representative collection of goods and services
 * inflation rate- the percentage rate of change in price level over time
 * core inflation rate- the rate of inflation excluding the effects of food and energy prices
 * hyperinflation- inflation that is out of control
 * quantity theory- theory that too much money in the economy causes inflation
 * demand pull theory- inflation occurs when demand for goods and services exceeds existing supplies
 * cost push theory- inflation occurs when producers raise prices in order to meet increased costs
 * wage price spiral- the process by which rising wages cause higher prices and higher prices cause higher wages
 * fixed income- income that does not increase even when prices go up
 * delation- a sustained drop in the price level

Questions
 * 1) When inflation happens it makes it harder to purchase goods and services. For example when gas prices go up its hard to fill up your cars every week.
 * 2) The consumer price index is to compare the cost of goods and services today with ones from years ago.
 * 3) A wage price spiral is when raising wages causes higher prices, and higher prices cause higher wages. Happens when a company increases their wages.
 * 4) Economists were confused because low unemployment usually leads to high inflation.
 * 5) If the CPI for last year was 164 and for this year it was 168 then the inflation rate would be -2.3%
 * 6) You might think its normal to get more money and not have to pay more for other things.