What is inflation, anyway? It’s a word we hear pretty often, but it’s not always clear what it means. Here’s a rundown of the basics – and why inflation matters to us all.
What is inflation?
It’s basically just an increase in the price of goods and services over time. For example, maybe you’ve noticed you’re paying £1 for a pint of milk now rather than, say, £0.98 a few months ago.
It has a few causes:
- Demand exceeding supply (i.e. there’s not enough of a product or service to go around. Consumers are willing to pay more, so businesses can raise prices)
- Raw materials increasing in price, which means it costs more to manufacture a product
- The government being in debt and printing more of its own money to cover its spending
The main problem? If wages don’t keep pace with the rate of inflation, people can’t afford to … Read more