Page 59 - Book3E

CHAPTER 9
Inflation—What Is a Dollar Worth?
It probably comes as no surprise that the purchasing power of a dollar is less today than it once was. We all remember stories from parents and grandparents about being able to buy a loaf of bread for a nickel, a hot dog on the street corner for a dime, and a gallon of milk for a quarter. In economic terms, inflation is defined as a fall in the market value or purchasing power of money. Many economists define inflation in their own way. Some of these definitions follow:
• Increase in the overall level of prices over an extended period of time.
• The rise in price of goods and services, or Consumer Price Index (CPI), when too much money chases too few goods on the market. (Source: www.trader-soft.com)
• An increase in the general price level of goods and services; alternatively, a decrease in the purchasing power of the dollar. (Source: www.finet.com.hk)
• A rise in the general price level that results in a decline in the purchasing power of money. (Source: www.senate.michigan.gov)
• The persistent and appreciable rise in the prices of goods and services. Moderate inflation is normally associated with periods of expansion and high employment—increasing dollars chasing a dwindling supply of goods. Hyperinflation, when prices rise 100% or more a year, causes people to lose confidence in the currency. During inflationary times, people often divert their investments into real estate and gold because they usually retain their value. (Source: www.tiaa-crefbrokerage.com)
• A rise in the prices of goods and services, often equated with loss of purchasing power. (Source: www.mckibbins.co.nz)
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