Six things you should know about inflation.
Made by: Hayden Allee and Ryan Cummings
1. Inflation: A general incline in prices often caused by a surplus in the supply of money or credit. It can also be caused by a decrease in government, personal, or investment spending. As inflation increases every dollar you own buys a smaller percentage of a good or service.
2. Inflation is important because the government uses it to determine set up economic policies and to set interests rates by banks. Has a direct impact on peoples incomes and anything index-linked such as state benefits, pensions, and some train tickets will be on the rise.
3. Inflation affects people by making their money decrease in value every year. When inflation is high the dollar is cheaper faster, but when its low its getting cheaper slower. Example: when inflation is high prices at the grocery store will be high too.
4. Inflation usually isn't that important because it generally stays at 3 or 4%. But when looking at retirement you need to think of how much the value of your money changes. And plan ahead so that you can live comfortably.
5. Is inflation or deflation a greater risk? Deflation is the greater risk because no benefits from any of it. It causes major economic recessions and during deflation periods demand falls as businesses wait for lower prices. Which means the no one if buying goods or services anymore.
6. Inflation would encourage consumption as well as investment and even bring housing prices into line. Not all inflation is bad, the economy wants a little bit of inflation so that it would allow people to repay their taxes with cheaper dollars.