inflation and unemployment final
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InflationInflation andand
UnemploymentUnemploymentHow these guysHow these guys
can make yourcan make yourlife miserablelife miserable
by David Beck 2000
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What do theseWhat do thesecreatures,creatures, inflationinflation andandunemploymentunemployment, have to, have to
do withdo with moneymoney??
Lets find outLets find out
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InflationInflation is when the valueis when the valueof your money goesof your money goes
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Or down?Or down?
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Like this?Like this?
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But how can inflation beBut how can inflation be
that? Goingthat? Going downdown??Important! You see here thatImportant! You see here that
thethe valuevalue of your money isof your money isgoinggoing downdown in inflation!in inflation!
And because yourAnd because yourpurchasingpurchasingpowerpoweris less, that meansis less, that meansthatthat
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PricesPrices are goingare going
to go up!to go up!You see, with the value of theYou see, with the value of the
dollar nowdollar now lowerlower
Seller
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Sellers will now need more ofSellers will now need more ofthose dollars to make up forthose dollars to make up forthe lower value!the lower value!
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Sellers will now need more ofSellers will now need more ofthose dollars to make up forthose dollars to make up forthe lower value!the lower value!
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Therefore, prices go up,Therefore, prices go up,
and you now haveand you now have
TaTa--da!da!
Inflation!Inflation!
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So then, again,So then, again,
what is going up???what is going up???
It is not yourIt is not yourmoneymoneythat is going up butthat is going up butthethe
4.954.95
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9.649.64
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34.2934.29
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63.9263.92
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99.9599.95
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It is theIt is the
pricespricesthat arethat aregoinggoing
up!!!up!!!
264.98264.98
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And again, that isAnd again, that is
becausebecause the value ofthe value ofyour money isyour money is lessless
than it was before.than it was before.Your money is goingYour money is going downdown..
Down, down, downDown, down, down
I cant stand it anymore! My dollar
used to buy ten loaves of bread!!!
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What are some of the causesWhat are some of the causes
of inflation?of inflation?DemandDemand--pullpullToo much consumerToo much consumerbuying to meet supply, resulting inbuying to meet supply, resulting in
shortages.shortages.CostCost--pushpushCost of labor goes up.Cost of labor goes up.
WageWage--price spiralprice spiralWorkers wantWorkers wantmore wages and this drives upmore wages and this drives upprices. This then drives up wagesprices. This then drives up wages
and it just keeps going on up.and it just keeps going on up.
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The losersThe losers The winnersThe winners
Savers.Savers.
The moneyThe money
they put inthey put inthe bank nowthe bank nowwill be worthwill be worth
lessless laterlaterwhen theywhen theywithdraw it.withdraw it.
BorrowersBorrowers..
The money theyThe money they
borrow now willborrow now willbe paid backbe paid backwith moneywith money
worthworth lessless thanthanwhen it waswhen it wasborrowed.borrowed.
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This is more significant than
you think. Answer thisquestion
Who borrows the mostmoney in our country?
The answer should tellyou a lot!
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Whup! LooksWhup! Lookslike morelike more
inflation on theinflation on theway Errgh!!!way Errgh!!!
What can you do about it?What can you do about it?
Lots!Lots! Stay tuned!Stay tuned!
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But for nowBut for now
Remember,Remember,thethe valuevalue ofofyour moneyyour moneyis really justis really just
what we allwhat we allthinkthink ititshould be.should be.
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What the government (and all ofWhat the government (and all of
us!) really wants it to be likeus!) really wants it to be like
=Money out there Pr oductive capacity
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Dont forget!Dont forget!
ThisThis
is just allof usis just allof us
working hard toworking hard tomake things thatmake things that
willmakewillmakepeoples livespeoples lives
mater
ially b
ett
er!mat
eria
lly b
ett
er!
And how do wemeasure this?
Yes!Gross
DomesticProduct!
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What the government (and all ofWhat the government (and all of
us!) really wants it to be likeus!) really wants it to be like
=Money out there Pr oductive capacity
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If there is a lot of moneyIf there is a lot of money
out there (in a sense,out there (in a sense,moremore than the matchingthan the matching
production capacity)production capacity)
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Then there isThen there is
inflation.inflation.
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If there is less of that $$$If there is less of that $$$out there, then it isout there, then it is
valued more.valued more.
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But again, there cant too few of these out there!
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Once againOnce again
We want these to be equalWe want these to be equal
=Money out there Pr oductive capacity
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But what if theres too muchBut what if theres too much
money out there?money out there?
=
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Yep! You have inflation!Yep! You have inflation!
=
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Indeed, this isIndeed, this is the mainthe main cause of inflation:cause of inflation:
Too much money in the economy.Too much money in the economy.
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So the government will try to takeSo the government will try to take
money out of the economy!!!!!money out of the economy!!!!!
=
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So the government will try to takeSo the government will try to take
money out of the economy!!!!money out of the economy!!!!
=
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So the government will try to takeSo the government will try to take
money out of the economy!!!!money out of the economy!!!!
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So the government will try to takeSo the government will try to take
money out of the economy!!!!money out of the economy!!!!
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So the government will try to takeSo the government will try to take
money out of the economy!!!!money out of the economy!!!!
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And hopefully it will be back toAnd hopefully it will be back to
what we want it to bewhat we want it to be
=
But be careful! Look!
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There may beThere may beunemployment!unemployment!Why?Why?
It is because companies nowIt is because companies now
havehave lessless money to pay theirmoney to pay theirworkers. Companiesworkers. Companies borrowborrowmoneymoneyto help their production!to help their production!
(Pinkslip)
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There may beThere may beunemployment!unemployment!Why?Why?
And because we live in aAnd because we live in a debtdebt--based societybased society (everyone(everyoneborrowing), companies rely onborrowing), companies rely onborrowed money to sell theirborrowed money to sell their
products!products!
(Pinkslip)
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There may beThere may beunemployment!unemployment!Why?Why?
And when they cant sell theirAnd when they cant sell their
products, guess what theyproducts, guess what theyhave to do? Yes! They havehave to do? Yes! They haveto say Youre fired! a lot!to say Youre fired! a lot!
(Pinkslip)
Youre
fired.
Im sorry that Im
just not worthy,Mr. Trump.
*#&@%#
you fathairdo-
challenge
d
*#&@%#
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What kinds ofWhat kinds of
unemployment are there?unemployment are there?1.1. FrictionalFrictionalPeople arePeople are
between jobs.between jobs.2.2. StructuralStructuralJobs are noJobs are no
longer needed.longer needed.3.3. SeasonalSeasonalJobs may beJobs may be
available only at certain times.available only at certain times.
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More kinds of unemploymentMore kinds of unemployment
4.4. TechnologicalTechnologicalMachinesMachinesreplace people.replace people.
5.5. **CyclicalCyclicalThe overallThe overalleconomy changes.economy changes.
ExpansionExpansiongrowth, prosperity.growth, prosperity.RecessionRecessiondecline in economy.decline in economy.
Major recession is aMajor recession is a dedeppressionression..
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What happens if theWhat happens if the
unemployment rate gets up tounemployment rate gets up to
8%?8%? 10%? 15%?10%? 15%?Yikes!Yikes!
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Remember this?Remember this?
We want these to be equal.We want these to be equal.
=
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But if there is too little moneyBut if there is too little money
there, then there isthere, then there isunemployment! Errgh!unemployment! Errgh!
=
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There is something thatThere is something that maymay
happen here. Do you knowhappen here. Do you knowwhat it is?what it is?
=
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How aboutHow about
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How aboutHow about
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How aboutHow about
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How aboutHow about
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Th th t ddTh th t dd
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Then the government may addThen the government may addmore money to keep up with it!more money to keep up with it!
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But it is a difficult balancing act.But it is a difficult balancing act.
We will discuss more on thisWe will discuss more on thiswhen we go to Monetarywhen we go to MonetaryPolicies.Policies.
dontdont be impatient.!be impatient.!