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Understanding Inflation: Why Prices Change and What It Means for Your Wallet

Inflation represents a sustained increase in the general price level of goods and services, measured annually. As inflation rises, each dollar you have buys fewer goods and services. Historical examples include the cost of a Ford Coupe, which was $520 in 1926 and would cost over $6,336 today. Understanding the discrepancies in pricing over time, especially for vehicles like Cadillacs and Buicks, helps illustrate the effects of inflation. This overview delves into the reasons behind price changes and their implications for consumers, emphasizing the relationship between inflation and purchasing power.

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Understanding Inflation: Why Prices Change and What It Means for Your Wallet

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Presentation Transcript

  1. Inflation Why does it not always add up?

  2. What is Inflation? • Definition • Inflationis a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service. • In other words • What cost you $100 in 2000 • Cost you $125.26 according to the Bureau of Labor Statistics

  3. Cost from then to now • This is the price of a Ford Coupe in 1926 • $520 • How much would this car cost today? • Bureau of Labor Statistics Inflation rate Calculator • $6,336.74

  4. Cost from now to then • Ford Coupe 2010 • $20,995 - $35,995 • What would this cost in 1926? • Bureau of Labor Statistics Inflation rate Calculator • $1,722.87 - $2,953.79

  5. Why such a difference? • The coupe back then a lower model?

  6. Cost from then to now • In 1921 the Cadillac touring model cost • $3940 • How much would this cost today? • Bureau of Labor Statistics Inflation rate Calculator • $48,013.02

  7. Cost from now to then • Cadillac touring model 2009 • $36,560 - $58,575 • How much would this cost in 1921? • http://www.bls.gov/data/inflation_calculator.htm • $3,034.05 - $4,861.04

  8. The Comparison Then Now • Ford Coupe 1926 • $520 • Ford Coupe 2010 • $1,722 - $1,953 • Cadillac 1921 • $3940 • Cadillac 2009 • $36,560 - $58,575 • Ford Coupe 1926 • $6,336 • Ford Coupe 2010 • $20,995 - $35,995 • Cadillac 1921 • $48,013.02 • Cadillac 2009 • $36,560 - $58,575

  9. Why the difference? • Why is there a difference with the Ford but the Cadillac is closer to the same?

  10. Cost from then to now • Buick Touring Car Model-D 1921 • $650.00 • http://www.bls.gov/data/inflation_calculator.htm • $7,832.43

  11. Cost from now to then • Buick LaCrosse 2010 • $27,085 - $33,015 • http://www.bls.gov/data/inflation_calculator.htm • $2,247.74 - $2,739.86

  12. Why the difference? • Again there is a big difference why?

  13. Comparable?

  14. Comparable? Hudson Coach 1926 Kia Soul 2009 • Cost then • $1,165 • Cost now • $14,196.74 • Cost then • $1,093.87 - $1,390.94 • Cost now • $13,300 - $16,950

  15. Does this transcend other areas?

  16. Assignment Options Research Paper Research Project • Explain why vehicle prices have exceeded the inflation rate. 3 page minium • Take a given 10 year period and chart the price trends for 6 items over that period. And graph the trend to determine future prices.

  17. Research project Example

  18. Any Questoins?

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