Why is my coffee twice the price?

An Inflation Story

---

Today all we hear is inflation this, inflation that, whether it is from our parents, the news or anywhere on the internet. And while it sounds like a boring topic of discussion, it is a very important economic phenomenon that actually affects lives, for instance, mine. One scoop of my favourite ice-cream’s price has risen 5 ron in the last year, outrageous I say.

Therefore, in this article I will attempt to make you understand the concept of inflation and where it originated from, so now when you hear adults talking about it around you, you can join in and show them how smart you are.

THE BASICS

Inflation is the rate of increase of prices over a given period of time. For example, if inflation is 3%, the things you currently buy for $1.00 will cost you $1.03 in the future. Inflation, though generally referred to as a bad thing, is inevitable and a byproduct of the contraction and expansion of our economy. The best thing we can do as a global population is control it.

There are 2 branches of inflation:

• Deflation - when prices fall but buying power rises

• Hyperinflation - when prices rise by 50% or more per month

Recently, people have also discovered “shrinkflation”, which means that companies reduce product sizes but keep the price the same, like my favourite ice-cream scoop becoming smaller and the price stagnating, or even increasing.

---

INFLATION OVER THE YEARS

In 1964, inflation measured a little more than 1 percent per year, I know right, huge difference. But inflation began rocketing in the mid-1960s and reached more than 14 percent in 1980, even more than today, though it eventually declined to only 3.5 percent in the latter half of the 1980s.

Luckily, over the past two years inflation has been on a decline, the four main causes of its rise being: the switch from services to goods, vulnerabilities in supply chains, an increase in the housing market and working from home and, obviously, Russia’s invasion of Ukraine.

Surprisingly, a very good thing the average Joe could do during a period of cool inflation is invest in stocks, real estate, cryptocurrency, or anything really. But seeing as most of you reading, including myself, are minors and can’t really *legally* invest, the best thing I could do is conduct thorough research and find ethical ways we can also expand our non-existent portfolios.

All in all, it is expected that after reading this article you will have an at least vague idea of what inflation is and what it does, just in case someone comes up to you on the street and randomly asks you for an explanation in exchange for something!