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Learn About Inflation

Here is everything you should know about inflation, and why chocolate is an important part.

Inflation. You might have heard about it on television or heard your parents talking about it. It definitely isn’t blowing up balloons. Inflation, when talking about money, refers to an item costing more now than it used to. Or, in other words, money not being as valuable as it was.

One of the best ways to track inflation is chocolate. Specifically, Hershey’s Milk Chocolate bars. Why those bars? Because they have been around since 1900, they are sold everywhere, and they have regular demand. Tracking inflation through Hershey bars is also simple: 2 kids eating chocolateCompare the price of the bar with the weight of the chocolate. How many cents per ounce of chocolate does a bar cost now? How much did it cost ten years ago?

So what causes inflation?

  • More money — Sometimes it’s people making more money. Other times governments pump extra money into the market. Either way, when more money is being spent, prices will go up to eventually compensate.
  • High demand — If resources run low, or demand is raised, prices go up. When this happens with common things like gas, building materials, or food, it can cause inflation all over.
  • Lack of confidence — If people think their money isn’t worth much, it won’t hold value. This tends to be a reason inflation continues and is often part of why hyperinflation happens. That’s when things get ridiculous and money hardly makes sense.

Is inflation bad? Generally, no. People make more money, common things like food and gas go up in cost so the people making those things can earn more money. So, if we go back to looking at a Hershey bar, the cost goes up like this:

  1. People make more money.
  2. Food and other things go up in price.
  3. That means Hershey needs to pay workers more to keep up and be fair to their employees.
  4. Hershey needs to make more money to cover the increased cost of paying employees.
  5. The price of a chocolate bar goes up.

Most economists, the people who study things like inflation, agree that this slow, steady growth of inflation is good.

When inflation goes quickly is when it is a problem. That is usually when governments are printing more money than they need. This happened in the country of Zimbabwe between 2001 and 2009. They pumped so much extra money into their economy that they printed a 100-trillion-dollar bill! And that bill was only worth about five U.S. dollars.

So next time you’re negotiating your allowance or chore money with your parents, bring up inflation. Maybe remind them that you could save more money if you didn’t have to spend it all on candy, games, and movies.

 
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