In short, inflation is when the dollar becomes less valuable, the value becomes inflated. For example, think of a big mac, let's say it costs $5 before inflation but after inflation, it were to cost $10, for the same burger. Assuming your hourly pay is the same in both situations. That's where inflation impacts you as a person. The same things become more expensive. What causes inflation In short, an imbalance. Inflation is usually caused by either an increase in spending, increased demand, and/or a higher production cost to make something. Supply and demand also contributes a fair bit. Why inflation has just now become so bad There are a number of factors that play into this specific inflation event. Covid was definitely a big player to this inflation event, from the stimulus checks given during covid. Creating an increase in everyone's spending budget. This increase in budget allowed people to purchase more, causing an influx in supply, with steady levels of demand, and setting forth the 2022 inflation domino effect. Further, due to the lack of vehicle transit during the lockdown, gas companies had an immediate over supply of product, relative to the virtually nonexistent demand. Making gas super cheap, and losing the gas companies billions in profit and revenue. This loss will later be recovered in the skyrocket of fuel prices in early 2022. This increase in fuel price made pretty much everything more expensive to produce and manufacture due to the higher transportation and shipping costs, adding to the domino effect. The final contribution from covid was the government's action to lower the interest rate. This was initially performed to encourage cash flow throughout the entire economy, even during the extremely unstable times. However this lower interest rate was left abnormally low for longer than it should've been. Causing people to continue making big purchases, for too long, allowing the sellers to continue getting more and more money for the same product. And causing an imbalance in the economy. How does inflation get under control In order to slow inflation, you must slow the cash flow, this forces consumers to think twice before a purchase. Since interest is higher and they will ultimately end up paying more. This second thought will turn away most consumers and force the sellers to either stop increasing their prices or even lower their prices due to the natural laws of supply and demand. This slow in cash flow is usually achieved by increasing interest rates.
