I am admittedly no scholar in mathmatics & economics but know the basics. My stupid question is on clarifying what inflation means when you read in an article that a country's inflation rate is up 7000%? That means that if you made a dollar last January & could buy a 12oz can of Soda for that dollar & a year later in January inflation was up 7000% that means that same 12oz can of soda would cost 7000 times more or about 7000 dollars right or is it the opposite. That orginal dollar 12 months ago is larger by 7000x what it is now?. LOL I know I'm dumb lol.
2007-08-22 07:24:37 · 3 answers · asked by bpeter3196 5 in Social Science ➔ Economics
LOL like i said I'm not a scholar forgot to drop a 0 or two. Still can't picture paying 70 bucks for a 12oz can of soda as in my example especially if my wages went up. Let me ask a follow up question if you make $100,000 dollars & get a raise for 5% & inflation averages 5% that year you basically are making the same as you were before the raise correct? & if you got a 10% raise but inflation was 5% your increase benefit would really only be 5%? I ask that because a friend of mine she mades the same $53,000 that she did 3 years ago & has contributed the same to her IRA & 401k yet has recieved more each year back in her tax returns which means she's basically making less now then she was when hire correct?
2007-08-22 08:03:53 · update #1
You are on the right track the first time. However, since the inflation is in percent, you have to drop two zeros. You will need 70 current dollars (or whatever the local currency is) to buy that can. It also probably means that you are being paid close to 70 times now (in the new currency) as much as you were last year. Such an inflation makes it totally useless to put anything into the bank as it will lose its value very quickly. Therefore, banks will not have money to lend to businesses and the industrial base of the country gets destroyed and people lose their jobs. Germany had worse inflation between the wars and the economic destruction enabled a demagogue to take over the country. Under President Carter, we had 21% inflation for a while. That meant that something that cost $100 last year cost $121 now. You could not get a house mortgage or car loan. The other part of the problem was that salaries did not go up to match and the country was in great need of help as his first term came to a close. He was not elected to a second term.
2007-08-22 07:42:07 · answer #1 · answered by MICHAEL R 7 · 0⤊ 0⤋
I'm guessing your wondering about Zimbabwe.
It means that something that cost $1 now costs $70. 7000% is 70x, but I'm not sure how often it goes. I think it is based on what the value of the currency was a year ago.
2007-08-22 14:33:45 · answer #2 · answered by kirby4d 3 · 0⤊ 0⤋
No, it is a percentage of 100. If inflation went up 7% then you will spend 7 cents more on the dollar.
2007-08-22 14:35:18 · answer #3 · answered by Anonymous · 0⤊ 0⤋