Have you heard people talking about high prices? You may have noticed they mentioned the word inflation. Currently, the United States is experiencing its worst inflation in 40 years. What is inflation and what is causing it?
Inflation happens when the price of goods and services goes up. This makes the value (or how much something is worth) of money go down. There are three key reasons for inflation.
Wages. Wages are what a company pays its workers. Lately, companies are paying workers more. That sounds like good news, right? To pay workers more, companies are charging more for their goods and services. This makes prices go up.
Demand. Demand is how many people want a good or service. Right now, many people want to spend money on goods and services. Because demand is high, people selling things can charge higher prices.
The Price of Gas. Due to the war in Ukraine, countries are not using Russian oil to make gas. This means the supply is lower. When the supply of something is low, the price gets higher. Now it costs people more money to drive to places. It also costs companies more money to transport goods. This means they raise their prices.
Many people are struggling to afford what they need because of high prices. The government is thinking about ways to lower demand. They are also looking at ways to make gas prices go down.
What Do You Think? Can you think of a way that inflation has affected your life?
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