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Week 7 | Discussion
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"Inflation"
In the past, the single largest asset a person or family owned was their home. However, since the
Great Recession and the bursting of the housing bubble in 2007, many families consider owning
a home a risky investment.
Check out the Bureau of Labor Statistics (BLS) Inflation Calculator
Test out the impact of inflation on an asset like a home.
Click on "Try the Inflation Calculator."
Enter the year you bought your home. If you have not purchased a home, enter a random year.
Assume that you paid $100,000 for it.
How much has the value of the home changed based on the CPI calculator?
Why does inflation encourage businesses and households to hold physical assets like homes,
buildings, and equipment?
RE: Week 7 | Discussion
Hi Class,
Please read the course materials for the week before answering the discussion question! This
week’s question addresses two issues that required elements to support your answer to the
question. It is assumed that many families consider owning a home a risky investment since the
Great Recession and the bursting of the housing bubble in 2007. You have to test out the impact
of inflation on an asset like a home using the Bureau of Labor Statistics (BLS) Inflation
Calculator and answer the question below
How much has the value of the home changed based on the CPI calculator?
Why does inflation encourage businesses and households to hold physical assets like homes,
buildings, and equipment?
When addressing the issue raised by this question, keep in mind that the understanding of the
effects of inflation is the best way to go with regard to this question. Inflation refers to rising
prices of essentials such as wheat, milk, meat, clothing, medical services, coffee, electricity, etc.
or, alternatively, the decline in value of money so that it takes more dollars to buy the same
goods and services. Older people often talk about how cheap things were when they were young.
A brand new car may have cost only $5,000 compared to $20,000 today, or petrol that cost only
a few cents in the 60s costs over a dollar today. Inflation happens when money loses some of its
value. We measure the rise of inflation in percent. For example, 2% inflation means that a $1
bottle of milk will cost $1.02 next year.
Class: What do economists mean by this statement: The real value of money or income
(purchasing power) is what matters to people, not the face value of money or income.
Week 7
In the Ten Principles video Dr. Todd Buchholz and Dr. Caroline
Description Hoxby debated the very existence of the Phillips Curve.
Dr. Hoxby indicated she was taking bets that the Phillips Curve is
alive and well. The problem may just be that it moves around and
possibly changes shape occasionally.
Policy makers like Congress and the Federal Reserve seek to steer
the US economy to a sweet spot where we have low
unemployment and only moderate inflation. The Phillips Curve is
supposed to describe the trade-off between higher inflation and
lower unemployment. Does it?
Instructions
Read the Business Insider article: Japan can help us better
understand one of the biggest puzzles facing the US economy
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Completion
QUESTION 1
Using data from the Bureau of Labor Statistics, what is the current level of
unemployment?
Be sure to include the link to where you have found your information
QUESTION 2
Using the data from the Bureau of Labor Statistics, what is the current level of
inflation?
Be sure to include the link to where you have found your information.
QUESTION 3
Are these high or low compared to the historical averages of the United States?
QUESTION 4
Should policy makers ignore the ‘historically observed Phillips Curve relationship’
and push unemployment even lower? Explain your thoughts.