6 Things To Know About Inflation

Jacob Lang and Tucker Evans

1.) What is Inflation?

Inflation refers to a situation where something cost more than it used to cost or the value of currency goes down over a period of time.

2.) What causes Inflation?

There are THREE main causes of inflation:

  1. Demand and Pull Inflation: When domestic product cost rises and employment falls
  2. Cost Push Inflation: When the cost of labor or raw materials goes up
  3. Expansion of Money Inflation: When the money supply of a country increases

3.) How does Inflation affect our Life?

The effect of inflation on us is that every dollar that you have is worth less than it used to be. The $1.00 bill in 2015 would have been worth $23.47 back in 1915. Even 15 years ago the dollar was worth $0.38 more than it does now.

4.) What are some examples of Inflation?

Examples of inflation is like the price of a loaf of bread. Back in 1988, the US Department of Labor indicates that a loaf of white bread was approximately 59¢. In 2013, that same loaf of bread cost about $1.42. In a 25 year span, the cost of a loaf of bread rose by 140%

5.) What does Inflation look like in the US?

Since 2005 it has gone down 2.7% starting at 3.4% and went up and down every year until it got to 2015 when it was 0.7%. The average inflation every year has gone from 2.2% in 1999 to 0.1% in 2015. To calculate the inflation rate, take its CPI, subtract from last year’s CPI of the same month, divide it from last years CPI of that month and multiply that by 100 and add a percent sign at the end of it.

6.) Fun Facts about Inflation

  • A dollar from 1950 is now worth 12¢
  • The United States has experienced two currency collapses due to inflation. The first was the Continental Currency during the Revolutionary War. The second was Confederation notes during the Civil War.
  • The dollar has lost 21% of its purchasing power in the last decade
  • The movie Cleopatra cost $44 million to make in 1963. With inflation taken into account, the same movie would cost $300 million to make today.
  • Historians cite runaway inflation as a major cause of ancient Rome’s fall.