Monday
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 8 The Data of Macroeconomics Chapter 24 of 36 Measuring The Cost of Living Section 12 of 14 … A year ago Sally Saver made a $1000 deposit in a bank savings account paying 10% interest per year. At that time a CD at the local music store cost $10. Her $1,000 was equivalent to the value of 100 music CDs. Now, a year later, with interest she has $1,100. How many CDs she now can buy depends on the current CD price. … Here are some examples of what could have happened to the CD price over the past year: Zero inflation · the price of a CD remains at $10 · the number of CDs she can buy with her $1100 has risen from 100 to 110 · she has had a 10% increase in purchasing power Six percent inflation · the price of a CD has risen from $10 to $10.60 · the number of CDs she can buy with her $1100 has risen from 100 to about 104 · she has had a 4% increase in purchasing power Ten percent inflation · the price of a CD ...