What is inflation?

Prices increase, but the value of $ goes down

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Examples

• game show from 1970s

• babysitting → shopping every Saturday @ the mall

• product sizes

http://www.thatonecaveman.com/2008/09/the-case-of-the-incredible-shrinking-cookies.html

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http://www.accidentalhedonist.com/index.php?title=the_incredible_shrinking_grocery_store_p&more=1&c=1&tb=1&pb=1

http://consumerist.com/2008/03/brawny-paper-towels-shrink-by-20-while-price-goes-up-6.html

Brawny Paper Towels Shrink By 20% While Price Goes up 6%

http://consum

erist.com/taking-it-seriously/grocery-shrink-ray/

Noxzema Jar Has 2 Fewer Ounces, False Bottom

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What causes inflation?

1. Demand – higher demand for something causes companies to raise prices to increase their profits

For example, if Apple knows they can only produce a certain amount of new iPads before the release date, they might raise the price to increase their profits.

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What causes inflation?2. Cost of production increases – if items cost

more to make a product, the company will often raise their prices.

For example, if dairy cows are ill and not producing milk, it will cost more to make mozzarella cheese. Pizzerias will be paying more for cheese and increase the price of their pizza to help cover the cost.

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What is Hyperinflation?

“inflation growing at a very high rate in a very short time” (Merriam-Webster http://www.merriam-webster.com/dictionary/hyperinflation).

(A rare economic phenomenon)

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How are you feeling?

Overwhelmed; I don’t really understand

Okay; I understand it but will be confused by more information

Great! I understand it and want to know more about hyperinflation.

Example of HyperinflationGermany post WWI (early 1920s): Germany

owed a large amount of money to France, Britain, and the United States. They eventually ran out of paper money and so they printed more bills than there were gold bricks in their treasury. This caused their currency, the Mark, to completely lose all value.

To illustrate how worthless their currency became: A women was carrying a basket of German Marks with her to a store to buy some bread. She left the basket of Marks outside and when she returned, the basket was stolen, but the Marks were left behind, dumped on the sidewalk.

Money (esp. small bills) lost its value, so people used it for other things…

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Year Bill being printed Extra Information One loaf of breadcosts...

1920 1 Mark 1.20 Mark

1922 10,000 Mark The Mark begins to lose value

3.50 Marks

May 1923 500,000 Mark Wallets? People are using suitcases to carry money!

1,200 Marks

July 1923 10 million Mark To print currency faster, Marks are only printed on one side.

100,000 Marks

September 1923 10 million Mark 2 million Marks

October 1923 1 billion MarkThey can’t print money fast enough!

670 million Marks

November 3, 1923 100 billion Mark When workers get paid, they buy anything they can; prices go up in hours!

80 billion Marks(Anderson www.joelscoins.com)

How did it stop?

On November 15, 1923, a new currency, called the Rentenmark, was introduced. (It was backed by land and industry owned by the govt to give it value.)

1 Rentenmark = 1 trillion Marks!

What causes hyperinflation?

1. Incredible shortages on goods/services.

2. A country owes foreign govts so much money that they do not have the gold/silver to back it up. Often times they will print an excess of money, which causes it to lose value.

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Looking for more?

Read the article about what happened in Zimbabwe…

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Bibliography

Anderson, Joel. "InterestingWorldCoins and Paper Money." World Coins and Paper Money from Joel Anderson. N.p., 2013. Web. 23 Oct. 2013.

Greenblatt, Miriam, and Peter S. Lemmo. Human Heritage: A World History. New York: Glencoe/McGraw-Hill, 2006. Print.

"Hyperinflation." Merriam-Webster.com. Merriam-Webster, n.d. Web. 24 Oct. 2013. <http://www.merriam-webster.com/dictionary/hyperinflation>.