1. 1. Write 2+ items that have gotten
more expensive in your lifetime
2. Write 3+ items that have gotten
less expensive in your lifetime

2. 2012 Comparison
Argentina GDP:
$476 billion
Spain’s GDP:
$1.3 trillion
United States GDP:
$16 trillion
Factors: population, resources, education,
crime

3. Zimbabwe
Population:
13 million
GDP: 10 billion
GDP/Capita:
$700
Unemployment:
66%

4. Your G3 is advising the President of Zimbabwe on how to improve
the economy of his country.
Situation: Many blacks can not afford goods and food in the
markets. Business owners are allowed to charge whatever price
they want and since food is hard to find, its very expensive.
Local Zimbabwe businesses have a difficult time competing with
imports from the USA, South Africa and England. When
Zimbabwe businesses fail, people lose their jobs causing more
unemployment.
98% of the farm land is owned by white farmers, which was taken
in the 1800’s from native Africans. 90% of this country is black
and has no access to this farm land. The white farmers pay low
wages and often do not hire native blacks.
Many people in Zimbabwe do not have much money to buy food
with. The Zimbabwe dollar is a strong currency which is difficult to
get much of because the central bank doesn’t print very much
money for people to use.

5. Zimbabwe 1990’s
Problem
Gov’t
solution
EFFECT
High food
prices
Fixed prices
Shortages
Competition from
USA & SA
More shortages
Blacks have
no land
Banned
imports
Redistributed
land
Not enough
money
Printed up
more money
inflation
Still more
shortages
President Robert
Mugabe
Technically “hyperinflation”

6. What if I told you?
• Million dollars?
• 25 Billion dollars?
• 100 Billion dollars
• Fiat currency = value
only because we
think it does

7. Hyperinflation in Zimbabwe
• Start of 2008
– 100 % inflation
• End of 2008-2009
– 10,000,000 %!!
– 10 X 6th inflation

12. Fiat
Currency
Advantages?
Disadvantages?
Currency

13. Why can’t we just print more money?
• Quantity theory of
inflation
Piles of currency in Zimbabwe

14. Money
3 functions
1. Stores value
2. Medium of Exchange
3. Unit of Accounting

15. Currency
Representative
Currency
Advantages?
Disadvantages?

17. Inflation
• Rise in
prices over
time
• “cost of
living”
• “The real
value of
currency”
• Deflation

18. GDP
• GDP = C + I + G + (Exports – Imports)
• Which one is affected by inflation?

19. Inflation
• Rise in prices over
time
• “cost of living”
• Calculate using
Consumer Price Index
• CPI =
Always a percentage,
But unlike unemployment rate,
It can be more than 100, or
a negative
1-3 % inflation = normal
Anything higher is bad for consumers
New Prices – Old Prices
Old Prices
X 100

20. 3. Sony PS3 Price change %
4. Gas in 2009: $2.50
2013: $3.12

21. Inflation calculator

23. • 1984

25. • 1994

27. If I buy 20 Gallons of gas per week
• At $1/Gallon
• At $2/Gallon
• At $3/Gallon
• Social Security

28. Recently though

29. What else causes inflation?
• Demand pull theory
• For example: fads or hot xmas toys
• Cost push theory• For example, increase the cost of
gasoline causes and increase in
the price of food.

30. Of the 3 theories of inflation
5. Which one can the government control?
6. McDonalds increases menu prices after minimum
wage increase
7. Fry’s increases all prices as gas prices increase
15% in January
8. Nike increases price of football jerseys every Fall
9. Apple increases price of popular mp3 itunes
downloads by 5%
10. In state tuition increases for the 10th consecutive
year
11. Xbox games increase in price after programmers
demand higher wages
12. Make up your own example

31. QE Assignment
• Draw 3 comics showing each of the
theories behind inflation

32. Fry’s increases all prices as gas prices increase 15% in January
Apple increases price of popular.mp3 itunes downloads by 5%
Federal Reserve increases money supply by $500 billion
In state tuition increases for the 10th consecutive year
McDonalds increases menu prices after minimum
wage increase
Nike increases price of football jerseys every Fall
Adidas increases price of soccer balls in 2014
Xbox games increase in price after programmers
demand higher wages
Tucson landlords increase rent after 2 % property tax hike

33. Fry’s increases all prices as gas prices increase 15% in January
Fry’s increases all prices as gas prices increase 15% in January
Fry’s increases all prices as gas prices increase 15% in January
Fry’s increases all prices as gas prices increase 15% in January
Fry’s increases all prices as gas prices increase 15% in January
Fry’s increases all prices as gas prices increase 15% in January
Fry’s increases all prices as gas prices increase 15% in January
Fry’s increases all prices as gas prices increase 15% in January
Fry’s increases all prices as gas prices increase 15% in January
Xbox games increase in price after programmers
demand higher wages
Xbox games increase in price after programmers
demand higher wages

34. Xbox games increase in price after programmers
demand higher wages
Xbox games increase in price after programmers
demand higher wages
Xbox games increase in price after programmers
demand higher wages
Xbox games increase in price after programmers
demand higher wages
Xbox games increase in price after programmers
demand higher wages
Xbox games increase in price after programmers
demand higher wages
Xbox games increase in price after programmers
demand higher wages