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4.2 Inflation & the Consumer Price Index

4.2 Inflation & the Consumer Price Index
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  • Math Help

    In the graph of the CPI from 1774 through 2010, note that the dates reflect the years that the U.S. was involved in the indicated war. For instance, World War I started before 1917, so the years listed are only those in which the U.S. officially participated in the war.

  • Consumer Suggestion

    Although Continentals were worth next to nothing by the end of the Revolutionary War, today they are highly sought after by collectors. Visit PCGS.com to learn more about collectible coins. You can use their pricing guide to see if any old coins you might have lying around your house are valuable.

  • Checkpoint Solution

    Using deductive reasoning (Chapter 3), the argument makes sense as long as the following premises are correct.

     Premise 1:   Inflation occurs when the monetary base grows faster than the amount of goods and services.
     Premise 2:   Deficit spending adds money to the economy without adding goods or services.
     Conclusion:   Deficit spending results in inflation.
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    Ron Larson (author)6 years ago |
    I love the graph on page 165. It's difficult to imagine what it was like to be living in a country in which there was almost no inflation. Notice that this was true of the United States for about 150 years after its independence.
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