Inflation is a problem that happens around the world, even in our own country. Inflation is necessary for an expanding economy. If the inflation rate stays near a 2% rise per year, the economy grows at a healthy rate. Before I get into what causes inflation in America, I should explain the factors that usually cause inflation in the first place.
Inflation - a general increase in the prices of services and goods in a particular country, resulting in a fall in the value of money; the rate at which this happens (Oxford dictionary).
- Cause 1 - Increased demand for products and services.
- Think about how each year the cost of the newest phone increases, why do you think that is? Well, it’s because of the demand for the item. When a successful company understands that their product will sell to a lot of people even if the price is raised by $100, they will still make enough sales to satisfy them.
- Cause 2 - Constraints on available supplies for goods and services.
- Constraints on goods and services consist of paying for Raw Material, Component Supplier, Manufacturing & Assembly, Distribution, Retail, and Consumer Demand.
- Cause 3 - An increase in the amount of money printed.
- Imagine you have a rare metal and it is worth a lot of money when you first have it. Then people start finding more and more of that rare metal so that it becomes just like any other metal. Now that everyone has that metal, is it special anymore? The correct answer is no. If you print more money, the value of the dollar on the CPI (Consumer Price Index) will go down fast. If the price of the dollar lowers, we will have to continue to make more money to keep up with the rising economy and we would most likely go into a depression.
Comparing the dollar bill from 1916 to 2021, $1 in 1916 is worth $23.88 in 2021. The CPI shows that the cost of the US dollar has risen approximately 2287.9% since 1916 and averaged about 4.8% each year. For a growing economy, 4.8% is not that bad. Furthermore, inflation can build an empire, or tear one to the ground, that’s why we need to be smart with how we spend, print, or restrain money.
Questions
What do you think could prevent inflation?
What are your opinions on inflation?
Why do you think some countries don't have much inflation?
Sources -
https://www.tocinstitute.org/examples-of-constraints.html
https://www.usinflationcalculator.com/
https://www.thebalance.com/what-is-the-value-of-a-dollar-today-3306105
Replies
Inflation in the market is like vitamins. Having a good amount is good for you, but too much and problems could start arising. I think that other countries don't have as much inflation because they don't print as much money. I think the printing of money here should be slowed down. However, speeding it up when dollars are scarce could fix the problem, but cause more inflation.
I agree, that was a good analogy for inflation. Other countries that don't print much money may not have bad inflation, but they could instead have deflation which could be just as bad as major inflation. Printing more money when dollars are scarce may help a country, but they would have to take their time with the printing so they don't get too much inflation.
When an item is high demand it makes sense that it costs more bc of the needs to be produced. It can build or tear down an empire which means it can be a good thing and bad thing.
I think that inflation can be annoying at times but it is necessary. When something is in high demand it makes sense that it costs more because more of it needs to be produced, same with the other way around. Like you said maybe the government not printing as much money.
I agree, inflation is annoying but necessary. Items like phones cost more and more every year because the demand for them is so high and almost everyone wants the newest phone and they are going to want to make more money than they are using to make the phones.
I think that if we limited the amount of trade regulations on imported and exported goods, we could see a decrease in inflation. Then the price of the dollar would stay correct. I think inflation isn't a good thing, but who wouldn't. I think some countries don't have as much inflation because of their stance in politics. Some nations might be run by dictators who put strict regulation on the economy, and others like the U.S. don't have regulations so much as other nations.
I agree that inflation can build or tear down an empire. It is a bad thing, but it can also be good.I think not printing so much money could slow down inflation. Some countries don't have a lot of inflation because they don't have a lot of money to begin with
I think something that could prevent inflation would be for the government to not print so much money like you said. I think inflation is a bad thing and that we need to do our best to stay away from it, but like you said it isn't always a bad thing either. It is bad when it happens too fast, though. I think that some countries don't have much inflation because they hardly have any currency in circulation to begin with.
I don't understand why it costs 23 bucks to make a single dollar bill. I think something could be done about that. Inflation can be annoying because the price of a popular item gets raised. I understand why companies do it because they're losing the amount of that item. Some countries don't have much inflation because of maybe population. If there aren't a lot of people to buy products then companies won't raise the price of that product. Or maybe their smarter with their money.
It doesn't really work like that. The dollar bill just used to be more valuable than it is now. I was more saying that $23.88 today would match the value of the US dollar back in 1916. A lot of companies raise the price of an item because they want to make more money and understand that a lot of people will still buy their product if they raise the price.
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