What is the deal with inflation?
In this episode we talk a little about inflation and what we feel it is to us. Is it good? Is it bad? Let's us find out!
What is inflation?
- Inflation is that rate at which prices of goods and services rise.
- 2% inflation is said to be good for the economy
- The federal reserve tries to control inflation with interest rates and other tools
- High inflation causes prices to rise too fast and money to be worthless
What causes inflation?
- Cost-Push Inflation
- Prices rise because the cost of materials and labor rise
- Shortages can cause this as the demand is there, but a low supply
- Demand-Pull Inflation
- Happens when people have a lot of money and demand goes up, so business raise prices to make more widgets
- Can happen when too much money is made
How does inflation effect you?
- Mild inflation can help to get business to hire more people
- High inflation is bad for nearly everyone. Peoples money becomes worthless as well as people take their money out of banks
- If someone's yearly income is only $25,000 and the inflation rate from one year to the next is 2%, that salary is now the equivalent to what $24,500 was the year prior
Watch us attempt to understand and explain inflation
