01 Food for thought. Concepts

• Economie
• Middelbare school
• vwo
• Leerjaar 3

Welcome

3 TVWO

Food for thought

The value of money

Purchasing
value

Purchasing value

The number of goods and services that people can buy with the money available to them.

BBC News - The cost of living rising in the UK.

What impacts someones purchasing value?

By the end of todays lesson

you are able to explain the concepts of

- nominal income;

- inflation;

- purchasing power.

Nominal income

The income you receive in money terms

e.g. you earn €2,000 per month

You earn €2,000 a month. Because you perform well at your job you get a raise of €100. With what percentage did your income increase?

You income increased with 5%. The inflation is 2%. With what percentage does your purchasing power changes?

Purchasing power

real income index = (nominal income index ÷ inflation index) × 100

In 2016, nominal income increases by 1.9%. The same year, inflation is 0.3%.

The nominal income index number is 101.9. The inflation index number 100.3.

The purchasing power index number is: (101.9 ÷ 100.3) × 100 = 101.6 Thus, real income has increased by 1.6%.

Assignment

See the assignments in classroom