- Homework for next week: read chapter 9- Grades will be posted later today on Learn@UW- Midterm:o Average: 67.19o Median: 67.5o High: 95o Low: 27.5o Advisory curve: A: 82.5 and above AB: 72.5 to 82.5 B: 65 to 72.5 BC: 55 to 65 C: 45 to 55 D/F: 45 and below- Inflation = the sustained general rise in the price levelo (Deflation = the sustained general fall in the price level)o Nominal vs. real Nominal: price tag, current dollars, paycheck amount Real: constant dollars, adjusted for inflationo General observations Frequently you hear people worrying about inflation and how it erodes (lessens)the purchasing power of the consumer- There are 3 possibilities:o Inflation reduces the real wage (this one seems the most logical)o Inflation doesn’t change the real wageo Inflation increases the real wage- E.g. your nominal income is $40,000/year, and projected inflation is 10%o If your nominal income increases by less than 10%, you are worse offo If your nominal income increases by 10%, you stay the sameo If your nominal income increases by more than 10%, your purchasing power increases Unanticipated inflation creates winners and losers: it is distributive- E.g. you have a fixed rate loan. If inflation occurs the buyer is better off because $1,000/month (for example) is worth less (has less purchasing
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