AP Macroeconomics 1.2 Measurement of Economic Performance

is inflation Well not sure what it is Okay specifically

it is a rate at which the prices on goods

and services increase Usually yes but on an annualized basis

Well this holiday season when your grandmama's ask her what

she paid for her house This one the one she

bought fifty two years ago The one with the bathroom

door knob that it always falls off Yet she bought

it for eight grand about what you pay now for

a six year old prius The house would sell today

for three hundred grand Why That part of town suddenly

get more valuable No not at all It's the same

It increased in value at the same rate as inflation

So it's real value is about the same as it

was back Lynn fifty two years ago An average worker

made a thousand bucks a year Today that same average

Worker makes thirty seven point five grand a year And

guess what The home back then sold for eight times

the average worker's salary And well guess what Today it

sells for eight times the average worker's salary Right back

to the answer Inflation is an increase in prices not

just a change So is out See really foreign currency

How about asking if it refers to the sound loose

skywalker's lightsaber makes when he turns on the power random

All right d increased purchasing power No the opposite If

you have lots of inflation a dollar goes less far

than it used to Remember that wheelbarrow full of german

marks right there their currency back then before the euro

it used to take one of those paper bills to

buy a loaf of bread and inflation struck and well

you know start eating stagflation No it's Not about breeding

kentucky derby winners Stagflation refers to a specific element of

inflation where prices go up But employment does not And

yeah it's a bad thing unlike the breeding scenario Okay

so that's it The answer is b increase in prices

we dread the day that balloons will eventually cost twenty 00:02:21.603 --> [endTime] Bucks Each that's really gonna burst our bubble