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  Chapter Nine:
 
MONEY
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  Average Earnings
  Minority Earnings
  Average Incomes
  Personal Consumption
  Philanthropic Donations
  Personal Debt
  Income Distribution
  Poverty
  Inflation

  

 

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MONEY

Inflation

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Inflation alternated with deflation and periods of price stability from 1900 to 1955. Every year thereafter witnessed some inflation, although at substantially reduced levels toward the end of the century.
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The century’s most extreme increases in consumer prices were registered before, during, and immediately after American participation in World War I. Serious deflation was associated with the Panic of 1907, the recession of 1921–22, and the first part of the Depression of the 1930s. After 1955, consumer prices rose every year, but the amount of the increase varied from a minimum of eight tenths of 1 percent in 1959 to a maximum of 13.5 percent in 1980. The amplitude of these variations subsided in the 1980s and 1990s. 

The chart shows the year-to-year change in the Consumer Price Index, commonly known as the inflation rate. The CPI is constructed by combining the price indices of eight classes of goods and services that are components of the budget of nearly all consumer units: food and beverages; housing; clothing; transportation; medical care; recreation; education and communication; and “other goods and services.” The latter category is composed primarily of personal expenses. The eight broad categories are broken down into smaller categories. Every month, prices for approximately 71,000 goods and services are collected from 22,000 outlets in 44 geographic areas to construct the price index. 

The eight categories that are combined in the CPI do not necessarily move in tandem. Between 1980 and 1998, for example, the CPI rose by 98 percent, while the price of medical care rose by 223 percent and the price of clothing increased by 46 percent. Nor do the prices of individual items within each category move in tandem. Between 1980 and 1998, the price of tomatoes increased 192 percent, while the price of eggs went up 53 percent. 

The prices of rare objects of all kinds, from baseball cards to Old Master paintings, frequently exhibited inflation rates much higher than those of the CPI, in some cases hundreds of times higher. Similarly, the prices of rare services, from the stud fees of winning racehorses to the hourly rates of corporate lawyers, often exceeded the prices of ordinary commodities by wide margins.


Chapter 9 chart 9

Source Notes
Source Abbreviations

HS series E 135; SA 1998, table 772; and SA 1999, table 776. See also the Bureau of Labor Statistics web site at www.bls.gov/cpifaq.htm (accessed October 19, 2000). See also Robert Sahr, “Inflation Conversion Factors for Dollars, 1800 to Estimated 2000,” at www.orst.edu/dept/pol_sci/fac/sahr/sahr.htm (accessed August 31, 2000). For the Consumer Price Index and extreme cases, see SA 1998, table 772. For producer prices, see SA 1998, tables 772 and 777, and HS series E 23.

 

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