Find the price of a product in the past. You can search various websites for his

Question

Find the price of a product in the past. You can search various websites for historical prices of popular products. One possibility is Historic Food Prices. Use the following Bureau of Labor Statistics table, which shows all the annual average CPIs for all years since 1913, to convert the price of the product you chose to the most recent dollar amount, as we did with Dr. Evil’s $1 million. Make sure you also address the following questions:

a) How does inflation affect our economy and the people in it?

b) Who does it hit the hardest?

c) How can you protect yourself against inflation?

Explanation / Answer

(a) When prices rise for energy, food, commodities, and other goods and services, the entire economy is affected. Rising prices, known as inflation, impact the cost of living, the cost of doing business, borrowing money, mortgages, corporate and government bond yields, and every other facet of the economy.

(b) Inflation hits pensioners and the poor hardest. People on lower incomes, including pensioners, have been hardest hit by inflation over the past 10 years. An Institute of Fiscal Studies (IFS) report has said that between 2008 and 2010 the poorest 20% of households suffered an average annual inflation rate of 4.3%.

(c)

Protect Yourself Against Inflation By:

Item Average price (dollars) January 1913 January 2013 Flour $0.033 $0.524 Fresh milk, per gallon(1) $0.089/quart (or $0.356/gallon) $3.526 Cheese $0.222 $5.832

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