Inflation is the increase in the prices of goods and services over time. It can be caused by a number of factors, such as:
- Imbalance between supply and demand, that is, there are more people consuming a product than it is being produced.
- Increase products costs causing the need to increase prices for the consumer.
- Increased issuance of paper money: The government puts more money into circulation.
As a consequence, we have a decrease in the purchasing power of the currency, that is, with the same amount of money, we buy less.
Let’s calculate your inflation ! – Mine ? – You may be wondering. Yes. Yours ! As a consumer of products or services you are subject to inflation.
Teaching the child to calculate private inflation:
Let’s say that in the first month she bought a chocolate and a lollipop and in the second month also:
Month 1: Spending $ Month: 2 Spending $
chocolate: 8.00.....................8.50
lollipop: 2.00.....................2.50
Total: 10.00....................11.00
So we have:
Excess spending = 11.00 - 10.00 = 1.00
Inflation percentage: (1.00 / 10.00) * 100 = 10
10% inflation!
If you’re brave enough, you can do this calculation with your budget! Then you’ll know what your real inflation rate is, which will probably be different from the inflation reported by the government.
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