Simple explanation of Inflation
Simple explanation: Inflation means that prices go up and more money will need to be paid for goods (e.g. a chocolate bar) and services (e.g. getting a haircut at the barber's.)
Inflation Dilemmas
- Inflation can make an economy uncompetitive. For example, higher rate of inflation in Italy can make Italian exports uncompetitive.
- Prices increase therefore people may buy fewer goods, the economy may suffer.
- People need to keep asking for pay increases to match price rises. This can cause problems at work.
- If people are on fixed incomes e.g. pensioners or students. They will be worse off because they will be able to buy fewer goods.
- The costs to businesses may increase. They may cutback on production (and thus, workers).
- If the prices of goods increase too much then people and businesses may start to import more goods from abroad because they are cheaper elsewhere. This will cause huge problems for the country's economy.
Inflation questions for Teachers
OxNotes Education is used in thousands of classrooms across the globe. At the bottom of each page are some questions for teachers to use, but of course anyone on the site can use these.
More information on ON in the classroom.
More information on ON in the classroom.
- Think of some goods that you buy regularly. What inflation have you experienced i.e. how have the prices changed over recent years?
- Which of the problems do you believe is the greatest to: a) individuals b) businesses c) the economy