What is inflation?

Anyone with grandparents will have probably heard some yarn about the good old days; kids played outside, poodle skirts were fashionable, greased hair was actually attractive, and everything was cheaper. It would appear that products of any kind were just cheaper back in yesteryear. So, what happened? Why aren’t we benefiting from gas only costing 18 cents a gallon? Why is it that buying a house now generally costs hundreds of thousands of dollars? Part of it has to do with inflation.

What is inflation?

Inflation refers to a decrease in the value of a dollar. How can inflation refer to a smaller value? It’s simple. The less a dollar is worth, the higher the price it costs for any product. When the prices go up, that’s inflation. In other words, as the cost of goods is inflated, the value of the dollar goes down.

Is all inflation the same?

There are two kinds of inflation. There’s something called cost-push inflation, which happens when production costs go up, increasing the price for the products created. Demand-pull inflation refers to the demand for an item shooting up, which causes the price for said item to go up.

Derek San Filippo

Derek San Filippo

Derek is a freelance writer who spends his off time either working with his rescue animals or writing children’s books. He lives in San Diego with his beautiful wife ... Web: www.financialfeed.com Details

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