Unit 2- February 2

• Inflation- an increase or rise in price
• Purchasing power- the amount of goods and services that your money can buy
• three causes of inflation
• printing too much money
• demand-pull inflation
• it is caused by and excess of demand over output that pulls prices upward
• cost-push inflation- it is caused by a rise in per unit production cost due to increasing resources cost
• inflation rate formula- current year price index - base year price index ➗ base year price index ✖ 100
  
• Rule of 70- it is used to calculate the number of years it will take for the price level to double at any given rate of inflation
• 70 ➗ annual rate of inflation
• the ideal inflation rate should be 2-3%
• Deflation- a general decline in price level
• Disinflation- occurs when the inflation rate declines 
• Nominal interest rate- the unadjusted cost of borrowing a lending money
• Real interest rate- the cost of borrowing or tending, adjust for inflation
• Nominal - Expected inflation
• Hurt by inflation
• lenders-people who lend money (at a fixed interest rate )
• People with fixed income
• Savers
• Helped by inflation
• Borrowers- people who borrow money
• a buisness where the price of the product increases faster than the price of resources