A lot of factors affect the prices of goods and if we look at the prices of rice and other food products for example it s easy to conclude that the prices have skyrocketed because demand for them is high and supply is low. No matter what it is you currently do for a living at the very least knowing a thing or two about inflation is a must.

Economics Inflation Bundle 3 Lessons Economics Learning

How the stock exchange works for dummies duration.

Understanding inflation for dummies. When prices rise on average in an economy it s called inflation. Though the periods of peak and trough are relatively brief and difficult to pinpoint understanding economic indicators can help you identify them. In terms of the relationship between the exchange rate and the inflation rate certainly the observation in 1974 is consistent with the theory s expectation.

The key to understanding the current economic situation is identifying when an economic expansion is over when the peak has occurred or when a new one is about to begin when the trough has occurred. A one minute video explanation of inflation. As the inflation rate approached 25 percent you observe a depreciation of the yen about 5 percent.

Because it takes inflation into account the real interest rate is more indicative of the growth in the investor s purchasing power. Kurzgesagt in a nutshell 6 764 136 views. The consumer price index or cpi is the main inflation report for the futures and financial markets.

If a bond has a nominal interest rate of 5 and inflation is 2 the real interest rate is 3. The real interest rateon an asset is the nominal rate minus the rate of inflation. Anyway understanding inflation starts with the basic law of supply and demand.

In the recent past in developed economies inflation has only been a few percent per year but some decades ago double digit inflation even in developed economies wasn t unusual. Unexpected rises in this indicator usually lead to falling bond prices rising interest rates and increased market volatility.