What is Inflation?

Inflation might sound a bit scary, but it’s actually something we all experience every day. It's the reason why a candy bar today costs more than it did a few years ago. Think of it like a balloon. When you blow air into it, it gets bigger, and so does everything inside it. Inflation works similarly: as more money is put into the economy, the prices of goods and services tend to rise. So, if you have $10 today, it might buy you more than if you wait a few years, when inflation has caused prices to go up. Here’s how it generally works: 1. The government might print more money or lower interest rates, making it easier to borrow. 2. With more money available, people tend to spend more. 3. As demand for goods and services increases, businesses may raise their prices because they know people are willing to pay more. 4. This leads to a cycle where the general price level of goods and services increases over time. Why does this matter? Well, if your salary doesn’t keep up with inflation, your purchasing power decreases. That means you can buy less with the same amount of money. It's why people pay attention to inflation rates; it affects savings, investments, and daily expenses. Does that make sense? Want me to dive deeper into how inflation can impact savings or the economy?