The Economic Goal of Price Stability
Related Resources
“Inflation - The Economic Lowdown Video Series, Episode 9”
Voluntary National Content Standards in Economics
Standard 19: Unemployment and inflation. Unemployment imposes costs on individuals and the overall economy. Inflation, both expected and unexpected, also imposes costs on individuals and the overall economy. Unemployment increases during recessions and decreases during recoveries.
- Benchmark 6, Grade 12: Unexpected inflation imposes costs on many people and benefits others because it arbitrarily redistributes purchasing power among different groups of people. Unexpected inflation hurts savers and people on fixed incomes; however, it helps people who have borrowed money at a fixed rate of interest.
- Benchmark 7, Grade 12: Inflation can reduce the rate of growth of national living standards because individuals and organizations use resources to protect themselves against the uncertainty of future prices.
Time required: 60 minutes
Price stability is an important economic goal. In this lesson, students participate in a mock-quiz exercise to experience effects similar to those that consumers experience when dealing with unstable prices. They analyze the impact that unexpected inflation and changes in purchasing power have on savers, borrowers, lenders and those living on fixed incomes. Students evaluate how price stability can ease decision-making and help the economy grow.