GLOSSARY. · Consumer price index (CPI) is the most widely known price-level index

· Consumer price index (CPI) is the most widely known price-level index. It measures the cost of purchasing a market basket of goods and services by a typical household during a lime period relative to the cost of the same bundle during a base year.

· Cost-push inflation is an increase in the general price level resulting from an increase in the cost of production.

· Demand-pull inflation is caused by pressure on prices originating from the buyers' side of the market. In contrast, cost-push inflation is caused by pressure on prices originating from the sellers' Side- of the market.

· Deflation is a decrease in the general level of prices. During the early years of the Great Depression, there was deflation, and the CPI declined at about a double-digit rate.

· Disinflation is a reduction in the inflation rate. Between 1980 and 1986, there was disinflation. This does not mean that prices were falling, but only that the inflation rate fell.

· Hyperinflation is an extremely rapid rise in the general price level.

· Inflation is a situation in which a decline in the purchasing power of money results in a rise of the general price level.

· Nominal income is income measured in actual money amounts. Measuring your purchasing power requires converting nominal income into real income, which is nominal income adjusted for inflation

· Nominal interest rate is the annual percentage amount of money that is earned on a sum loaned or disposed in a bank.

· Real interest rate is the nominal interest rate adjusted for inflation. If real interest rates are negative, lenders incur losses.

BANKING

DISCOVERING CONNECTIONS

When first opening a bank account, there can be a number of choices and factors to consider that will make the process seem quite discouraging. With time and patience, however, it becomes clear that the basics are actually fairly simple. A bank, in short, is simply a place to store one’s money, while offering access to it through a number of methods and from a variety of locations. It is important to research all of the available financial institutions in one’s area to determine which one offers the best services for your situation.

Answer the questions:

1. How often do you go to the bank? What do you usually do there?

2. What different kinds of services do banks offer to the public?

3. How will you comment on the following quote:

“A banker is a man who lends you umbrella when the weather is fair, and takes it away from you when it rains.”

(Mark Twain)

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