What is Inflation

Inflation is a rise in consumer prices, increasing the cost of living. Some inflation is caused because a country has printed too much money or experienced tremendous financial disaster, causing its currency to plummet. Other sources of inflation can be higher input or transportation costs such as gas, which makes it more expensive to ship good to the store. When the pressures get too great, retailers often pass these costs on to consumers. The consumers, in turn, have a harder time affording stuff such as toilet paper, toothpaste, jeans, paper, cars, lamps, furniture … you get the idea. At this point, the consumers demand pay raises at their companies, possibly pressuring profits further, which can lead to additional price increases, and the cycle begins. This is when economists say that inflation has become “embedded” in the economy. Continue reading ...