Introduction to inflation | Inflation - measuring the cost of living | Macroeconomics | Khan Academy

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Basics of price inflation and the CPI (consumer price index)
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Macroeconomics on Khan Academy: Topics covered in a traditional college level introductory macroeconomics course
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I knew things just got real when the math guy pulled out the calculator.

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[@Rondadoreronda]

In Japan we have been suffering from deflation for 20 years. Under the deflation supply decreases and companies go bankrupt. Of course, many Japanese companies have gone. In addition, the companies depending on exports have been damaged by strong yen. But the productivity of survival ones have been high by the rationalization of management. So they've managed to survive. Now Japanese government and the central bank decided to print lots of money to accelerate inflation. I appreciate it.

[@Commando303X]

One has to love the digitized TI-85 calculator. ;D

[@angelincognitofilms]

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[@ameyapatil7691]

Great explaination Sir.At the same time,have a look at this video as well.

[@quinnfowler9454]

Increasing the money supply is 1 of 2 ways to reverse price inflation. Whenever prices are too high, we try to switch to a different form of currency that's in greater supply. We are still transitioning to electronic currency. The only other way is to lower our demand for money. When our demand for a good exceeds the supply, a price is set to lower demand. The more our demands exceed supply, the higher the prices should be. So when the supply exceeds demand, we make everything free, only charging people for obscene waste.

[@newgyt]

HAH! eKHANomists

[@sharmeen7527]

lol

[@micahshively2831]

7 years later and you're still getting laughs

[@PavanKumar-qt1px]

@@micahshively2831 😆

[@VickiBee]

My mom and dad used to blame inflation on Jimmy Carter. They blamed the oil crisis on him too. I was in Grade School then. I didn't have an opinion on the matter, but I wondered how they knew all that.

[@omeganoobz]

Oil crisis was triggered by the iranian hostage crisis. Carter was just there at the wrong time.

[@andreirocks1992]

Hi there! Can you do more Science videos please :) ? You were on to something with Computer Science, and Physics.

[@rucaskeeper666]

Sir good videos. I have a question: does the inflation has intonaccount the increase in human population ?

[@omgiheartpie]

@SecondWindd I'm a Keynesian actually, and you pretty much summed up what I've thought all along.

[@user-oy5pw3rg2f]

Thank you!

[@TheTurbanatore]

Great job

[@maryblake2203]

>Inflation is killing my budget and my salary. I can't invest and it seems like I will need to sell all of my risk assets to keep my head above the water this year. What is the best solution right now? These are really though times.

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[@lucagiovanni658]

When you fail to invest while you are still active at work, you will end up regretting in the future..

[@helleland]

Do cosmological inflation next :)

[@truesonny5761]

Okay here we go!

[@51MontyPython]

I have a question, do both regular CPI and CPI-U account for % of income of the individual goods considered?

[@mareslsl]

The CPI uses statistics to identify inflation or deflation. CPI-U for prices paid for stuff/goods and services by people that live in urban areas

[@noahschmartz2354]

only Khan could know the exact question i had and and answer it in the first 25 seconds of the video.

[@luxorien]

@utubeknight I am just a student so take this with a grain of salt, but I think it's because money represents our labor. So, if we become more productive, we need more money to represent that added value. Maybe?

[@ChooseAname495]

That doesn't sound at all like a bad thing. is it? btw thank you for your answers.

[@bradenglass4753]

In the short run? It's great. In the long run, it's a disaster

[@rakolman]

How can there be a price inflation by supply shock if you previously haven't printed enough money to validate that higher price?

[@omgiheartpie]

@SecondWindd The principal and defining tenet of Austrian economic theory after unfettered markets is the notion that free market economies inevitably produce general price deflation and that inflation is strictly defined as an increase in the money supply. I'm not making any value judgments as your comment seems to imply; I'm simply deducing from his comment and apparent interpretation of how a free market economy should partly work that he wouldn't favor Quantitative Easing.

[@lancehampe5188]

1st period - Lance Hampe

[@jsymons1985]

I love the South Park calculator

[@MONEYANDTIME]

Although too much inflation is a problem, deflation is an even greater problem to the economy. So much stimulus check and money have been pumped into the economy to mainly avoid a massive deflation. If inflation does not follow, more and more money will be pumped into the economy, basically until we all start spending.

[@exponentialhorse]

So when spending kicks in and we have inflation again, how the level of inflation will be controlled?

[@tray22]

Deflation to zero would be bad, but if we deflate back to where it was before covid, that would be good. Inflation is the problem of today and not deflation to zero.

[@rogerwelsh2335]

You give the FED and our government too much credit. They don’t inflate to prevent deflation. They inflate to spend money. It’s a hidden tax.

[@daltoncrane6064]

2nd-Dalton Crane

[@aspenpreston8930]

AP - 2 period

[@oliviarader5116]

2nd- olivia rader

[@chandanjuneja7307]

how to make these type of videos? please help!!

[@carverchapman9926]

2nd- Carver Chapman

[@kyrawoods2541]

KW - 3rd period

[@51MontyPython]

It's interesting how so few people actually understand the difference between PRICE inflation/deflation and inflation/deflation as it pertains to the money supply. You would almost think it should be common sense, ....though, I also understand why people don't realize it. For example, they say that deflation is a bad thing, but fail to differentiate between that which deals with a decrease in money supply (where recessions/depressions hit because not enough people have any money to spend) and that which occurs only in the PRICES of goods due to INCREASED production/SUPPLY of GOODS and SERVICES RELATIVE TO the money supply (and population). Two completely different things. The former is bad, the latter is GOOD. It's just common sense though, really. Or maybe not

[@51MontyPython]

...

[@AbhishekKumar-dh4li]

51MontyPython The latter can be bad too. I remember reading about a console based game that failed because it produced too many cartridges. So many in fact that the number of cartridges was more than the number of consoles the company ever produced. The company endured a net loss despite the game being a hit.

[@alexusglover9128]

3rd- Alexus Glover

[@kylecahalan1350]

1:50 Ships are not cars, cheap oil not gas.

[@kelcamer]

Why do most economists think small amounts of inflation are good for an economy? It seems to me that if you have no inflation at all, the prices of goods would become lower since companies would compete for the best quality and lowest price goods, and then consumers could purchase more, so total wealth in the country would increase. And certainly the way to prevent inflation is to adhere to a monetary standard, such as gold.

[@51MontyPython]

Well yeah, derrrrrr. See, your only problem is that you have this thing called an ability to actually THINK, FOR YOURSELF. Not everyone has this ability, and that is why we are in the mess that we are currently in (and really about to see). Too many dumb/ignorant sheep. There is no common sense anymore; only insanity, of which, modern so-called "liberalism" -i.e. "progressivism" is the main culprit.

[@rogerwelsh2335]

I agree 100%. Inflation is not a good thing and it becomes worse when the government starts to intervene. Lower prices are the goal in a free market economy with real money used as currency. We should be seeing lower and lower prices with all of the advances we have had in technology and productivity. The U.S. increased its debt by 7 trillion dollars in 2 years and shut down key supply chains during this “pandemic”. This Current Inflation is really simple to figure out.

[@kelcamer]

@@51MontyPython I think it's entirely possible to have a valuable and useful discussion about this without judging or personally attacking people or ideologies on an emotional basis.

[@kelcamer]

@@rogerwelsh2335 well yes that is exactly what I'm asking. Is there a certain amount of inflation that can be considered good and if so why? I'm honestly very uninformed about this topic so I'd love to hear some extra perspectives

[@51MontyPython]

@@kelcamer It's on a _factual_ basis -- wrong is wrong -- and yes, I am emotional about it, for good reason. No, there is NO situation where even a "little" inflation is a good thing, but the corrupt bankster controlled Keynesian so-called "economists"/institutions teach otherwise. It's all BS.

[@amywilson2077]

2nd- sidney Martin

[@mannypigg6651]

Prices go up in high demand A strong economy with a lot of demand should have price rises. Even the supply demand graph will tell you that

[@mcronut]

If price is high, demand is high and supply falls for elastic good l, the same way round

[@jaynawalker1226]

2nd period -J.F.W

[@tylerrice3178]

2nd- Tyler rice

[@camdennicholson5438]

Camden Nicholson- 3rd period

[@lcbreezyl]

So if inflation happens every year and minimum wage therefore increases to keep up with it then prices will forever rise? So eventually we will get rid of cents? John Green CPG Grey have good videos about getting rid of the penny and maybe the nickel. Other countrys have gotten rid of their penny and the got rid of the half penny in the latter 1800s.

[@tanbirakhtar4767]

I am so Motivated.thanks sir.

[@zeighj1310]

Gaven Jenkins - 3rd

[@xcvsdxvsx]

when ever i use the word inflation i have been referring to an increase in the money supply O.o since in a free market economy prices should naturally fall, the prices of goods will not accurately reflect an increase or decrease in the purchasing power of your money, i.e. everything can become less expensive and the value of your currency can decrease both at the same time, this is why taxation through inflation is so absurdly effective

[@SecondWindd]

@omgiheartpie And how do you know that if I may ask?

[@nickicox4717]

Nicki Cox- 2nd Period

[@cameronshort3782]

-CS 3rd period

[@amandathomas8315]

Payton Thomas 3rd period Econ

[@kortneychristensen9030]

2nd period-kc

[@ath6635]

Someone forward this vid to the fed

[@ericgreen461]

1st Period-Eric Green

[@PraveenSriram]

Inflation is currently out of control in the United States 🇺🇸 but wages aren’t keeping up 🆙 with inflation

[@jaelynthompson5513]

Jaelyn Thompson- 3rd period

[@bobbybeasley8864]

2nd period Bobby

[@haleywilson2095]

H.W - 3rd period

[@tadprophet1997]

1st - Tad Prophet

[@ChooseAname495]

Ok I understand that prices may rise as a result of supply-shock, but other than that why do prices rise?At which point does inflation begin? because its like a domino-effect right?Someone somewhere raises their prices and then it gets passed on down the supply-chain but why does there have a to be a raising of prices to begin with?Oh and when supply-shock to economy is fixed does the inflation that resulted from it go away? or do prices remain at same level that they were raised to from shock?

[@michaelsvoboda1024]

Why exactly is a little inflation good? That's a dubious assertion...

[@cadeenoel8748]

C.N. - 3rd period

[@omgiheartpie]

@baydood510 no he wouldn't. He subscribes to Austrian economic theory.

[@josiewalker3589]

J.D.W - 2nd period

[@ritchiejoyvalencia5180]

#SANA ALL

[@ethanhawkins2002]

1st-EH

[@51MontyPython]

Question: And no, I do mean this in all seriousness, but just HOW in the heck can a "small" amount of inflation be a GOOD thing? I mean seriously? How?

[@lilayhagos4005]

are you still interested in knowing? i know its been two years but someone else might be curious so why not. To put it simply, if we don't have inflation, people won't have an incentive to but products now because they can buy them for the same price next year or the year after. A little bit of inflation encourages consumers to spend the money they make instead of saving it. The more consumer spending there is, the more productivity there is in the economy (because now businesses have more customers). Also, because the consumers will be spending their money, they will be encouraged to work more as well, further enhancing the productivity in the economy.

[@51MontyPython]

***** You are honestly stupid enough to fall for the bullshit that if I know the prices for goods will still be the same next year, I won't have any incentive to buy shit? _Really?_ Don't you see the absolute nonsensical _crap_ they're trying to shove down your throat? How can you possibly believe this malarkey? Don't tell me you're one of these who also falls for the 'Broken Window Fallacy?' That would make sense (not the fallacy, mind you, but that you would believe in it). Neither monetary inflation _nor_ deflation is good. Increase of the money supply is only good so long as it is enough, and only enough, to remain proportional with market 'norms,' all other things being equal (which of course they never are, but to the extent that they are), such as rate of population change, or jobs and entrepreneurs, as well as goods and number of them being produced, and level of demand, relative to that number. This would be in line with monetarist thought, which lies somewhere in between (as a compromise) neo-Keynesian and Austrian thought. I don't need my prediction of the prices for goods tomorrow to tell me what I want today. But if I knew prices were going to be _higher,_ it might discourage _saving_ which is vital. More savings allows lower interest rates (from greater bank reserves - i.e. "money supply") which means more job creation (the economic 'stimulation' you're looking for -- along with low (if any) taxes, of course)), and sufficient demand to justify those jobs, *_by_* those jobs (the existence thereof), and with those jobs paying better from lower cost to do business (and lower prices for the consumers - i.e. those same workers, to boot) -- SO LONG AS, the interest rates are not *_TOO_* low, so that they create *_INflation_* to where the cost to purchase goods only makes it all the more difficult if not impossible to do, which then leads to a lack of demand (and eventually _more_ difficulty doing business once it reaches capital goods), which then leads to recessions, and/or stagflation. Whoever you're learning from is either lying to you, or is an honest idiot. Use some critical thinking and common sense for yourself, man. Don't be a sheep to the 'Big Banks' - i.e. the *_Rothschilds._* You think the average independent private bank _wants_ low interest rates?? No, at least not those who are smart [enough not to be brainwashed themselves], but, _someone_ sure as hell (pardon the pun) _does._ ..And it _ain't_ because it serves _your_ best 'interest' (again, pardon..), or _even_ the 'Big-though-actually-NOT-so-big,' -- as in, other than "Central," -- _banks._ The greater the inflation (or even _deflation,_ if it be to the opposite extreme), the greater the "wealth" disparity, because the _real_ ones 'at the top' [of the pyramid....scheme..] are protected from it, but are even are able to _profit_ from it themselves. *_Don't you see??!!_* Either way, _"they,"_ -- as in, _NOT you,_ -- win, -- that is, in anything _other_ than a [_truly_] *free* market. ...My "two cents," i.e. _'humble'_ arrogant opinion. (Don't forget the fact that the more "money creation" there is (especially that which is in disproportion to that which a truly free market would normally create), the more _BASE MONEY_ is needed to justify that [fiat] 'money' creation It's _math._ ...Mind you, that means more money that the Rothschilds get to charge YOU AND ME for the *_LOANS_* (plus interest) that they then "have to" make to the govt who now needs to create that [_real_] money in order to provide the 'economy' aka _banks_ with the necessary amount of reserves....you know, to..._"stimulate"_ them I mean 'the economy' ... Man,..and to think that it's actually _leftists_ mostly who actually buy into this stupid/wicked ponzi scheme... O_o The mind boggles...

[@Kiwinnit]

monty he was only trying to help you, jesus.

[@kylecahalan1350]

If inflation went negative, people will not spend there money and keep it to invest, kinda like the depression.

[@toodqrk9840]

Kiwi lmao

[@lavanyabhatnagar7412]

What is 100 for apples, 100 for bananas at 4:38 ? I couldn't get. Are they price of apples and banana per kg?

[@51MontyPython]

You know, I used to say Keynesianism was like stepping on the brakes and the gas pedal at the same time, but now I take that back.... well, no, I mean, it's the same, so to speak, it's just that, well,....it's just that the _reality_ with Keynesianism is that what I had previously said was true is indeed true, in the conceptual sense, though it's really even worse yet than that, meaning, I think it's more like the gear shift is actually stuck in *_REVERSE_**.* DUE *_TO_* -- inflation. They're just flooding the pistons. We knew they would. It's the only thing the Central Banksters _can_ do, at any ol' time they feel like, catching a kickback (more like backdraft, to all of us), from the interest (and other moneys) paid back to them. It's a slush fund, people. I mean, think about it, it's a whole lot easier for them to *_INFLATE_* the money supply than to *_DECREASE_* it. Common sense. Use your brains, people. Just WHO do you think is getting all of that money? Hmmm? The so-called "conservatives?" Ha! And you know, come to think of it, even *_IF_* Keynesianism was right, they don't even follow it right! Hell, even *_KEYNES_* himself would be appalled/ashamed.

[@51MontyPython]

And not that the word "right" was necessarily the "_right_" word to use there (as _if_....that could actually be done (i.e. 'follow it [quote/unquote]'right')), but..... you know what I mean...

[@haileehughes4929]

Hailee Hughes - 2nd

[@reecereynolds2377]

Reece Reynolds -3rd

[@calebcherry6412]

Caleb Cherry - 1st

[@flashlindsey7173]

3rd period NL

[@jessicatussey1010]

1st paige smith

[@allyncook4480]

Ac 3rd

[@madalynleigh5572]

1st period MW

[@hunterbrewer6112]

hunter brewer-1st

[@jonathanritchie1723]

Jonathan Ritchie - 1st period

[@spencerdavis6304]

Spencer Davis-3rd Period

[@PADDYDETHECUS]

Ben Bernanke disliked this. ..I know...old phrase, but worth it

[@jonhill9564]

Support

[@sweatyclutch6989]

PB 3rd

[@chaoswingsandleaves9349]

Gabe Garrett watched this 3rd period

[@OCSnowBoarder]

Inflation that causes prices to rise is an effect of a dollar's value. Prices rises because the dollar is worth less. Lower dollar value is the cause and the effect is higher prices. In other words, more dollars are required to maintain value of a trade. The opening statement is incomplete

[@51MontyPython]

The only problem is, the amount of dollars the economy is required to use for the most proper allocation of [often scarce] resources [which have alternative uses] -- The 'cash flow,' of "dollars," (if you will), is unable to keep up with the rate of inflation. Whoever said that even 3% inflation was a _good_ thing was definitely off his rocker.

[@ITzMonkeee]

Gabe Clark - 2nd Period

[@carleyschultz6993]

CS 1st period

[@tannergillis8451]

Tanner Gillis-1st period

[@yungerow1510]

Evan Rowland 2nd

[@andrewgoodlett204]

1st period

[@hazadus3]

So a 1-3 percent continual loss of purchasing power is a good thing....riiight.

[@anthoelise]

Je suis certain qu'il n'y a aucun Français ici :D

[@travelindiatreasures]

Je suis Indienne mais Je parle francais

[@autumnfarler9536]

AF-3rd

[@jacobeads3327]

jacob eads 1st period

[@karfar8029]

The quantity theory of money as the explanation for inflation is utterly nonsensical. Yes, too much spending can cause inflation but does the money supply inherently cause inflation? No. Inflation is caused by demand pull or supply push forces. Modern day economists have recently openly admitted to not having a working theory of what causes inflation and it is quite clear that they don't. I mean, their prescription for inflation is increasing costs by raising the price of banking and increasing unemployment. How does that make sense?

[@xcvsdxvsx]

@baydood510 QE is just a symptom of a larger problem. The US government enforces a monopoly on the legal tender in our country which is issued by a privately owned corporation called the federal reserve. Every federal reserve note in existence is created as the principal on a loan so the interest on this debt can only be repayed by borrowing ever greater amounts of money. I beg you to watch this video, it is probably the most important video you will ever see /watch?v=Dc3sKwwAaCU

[@SecondWindd]

@omgiheartpie Besides, the Austrian school has been completely refuted and has no backing from any credible economist in the world. I really doubt that Sal would support it especially considering that he is not an economist and is not very deep into the subject matter.

[@cosmosatrosanguineus3171]

The thing is theres just no significant info we can gain here, or am i the only one who thinks like it?

[@ynarasing741]

nice

[@SecondWindd]

@omgiheartpie On the contrary, you said what you think he said. You are making a judgement without evidence to back it up. Maybe you are a fan of the Austrian School and you would like Sal to be too. I really doubt that he is a supporter of the Austrians considering that he is coming from MIT which is basically the stronghold for Keynesians and a big percent of the world's credible economists have graduated there.

[@danielnowlin9565]

D.A.N 2nd

[@user-on8tx9by5b]

Including monetary inflation makes this lesson confusing for my high school students. I have found the person narrating these Khan Academy video lessons to go off track way too often.

[@renamorcen]

too difficult for me...Y I SO STOPID ?

[@Chooong7]

renamorcen i am the 2018 version of you

[@Nobody-Nowhere-Nothing]

Hang in there Chooong7, we will forge through.