What Is Inflation?

And why is it happening?

You might have heard about how prices are going up for everything from gas for your car to groceries. And surrounding all of it is this idea of inflation. When I asked people about inflation in sixth grade half of the time people said they knew “absolutely nothing” or they were incorrect. Since this is an important topic, I felt that it should be explained.

Inflation in a nutshell 

Sometimes, you’ll see an article which compares how much money someone had a while ago and how much it is worth now. This is because the value of the U.S. dollar changes because of fluctuations in the amount of money the government is putting into the market. Basically, the Federal Reserve’s job is to make sure that the U.S. has no huge changes in the amount of U.S. money out there physically and digitally. 

Think of it this way: when something is valuable it is because there is a limited amount. This makes the item hard to get so it would be more valuable. But if there were a lot of that item, it would be less valuable.

Why inflation is happening now

As mentioned above, there would need to be more of the US currency for inflation to occur and the only group who can make that happen is the Federal Reserve. During the pandemic, the Federal Reserve was creating a lot of money because people had lost jobs and now needed a source of income.

You might have also heard that there was a very significant increase in the price of gasoline. This is because oil is becoming increasingly more valuable. With the development of the war in Ukraine, the U.S. is no longer purchasing oil from Russia so we are left to find other sources of oil. 

Stay informed 

This is an important topic so it’s beneficial to know what inflation is and be prepared for its effects. If you know the prices are going up, then you can be prepared. Most of all just stay educated.