To treat an illness costed $10,000 (dollars in 2019) ten years ago. A new technology to...
To treat an illness costed $10,000 (dollars in 2019) ten years ago. A new technology to treat this illness costs $10,000 (dollars in 2019) now. Do you think that there is zero inflation in the treatment specific for this illness?
Homework Answers
Inflation is the increase in the general price level. In this case, the cost of the treatment in 2019 when measured in 2019 dollars, is arrived at $10,000, which is equal to the cost of the treatment 10 years ago, when measured in 2019 dollars. However it does not implies that there is no inflation. This is because it is possible that over time with technological advancement, the rate of decline in cost of treatment is same as the rate of increase of the general price level. Due to this, while in real terms the cost was declining, in nominal terms it was increasing due to inflation. Hence, if we see the nominal cost, it may appear that it has not changed. But if we see the real cost it must have been declined.
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To treat an illness costed $10,000 (dollars in 2019) ten years
ago. A new technology to...
To treat an illness costed $10,000 (dollars in 2019) ten years ago. A new technology to...
To treat an illness costed $10,000 (dollars in 2019) ten years ago. A new technology to treat this illness costs $10,000 (dollars in 2019) now. Do you think that there is zero inflation in the treatment specific for this illness?
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