Why Do Inflation Rates Go Up When Everyone Has More Money?

Imagine you and your friends all get a lot of allowance, suddenly, everyone wants to buy the same candy. The store runs out, so they raise prices. That’s like inflation rates going up because people have more money to spend.

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Examples

  1. When your allowance increases, you buy more candy, the store raises prices.
  2. Everyone buys the same video game, it becomes more expensive.
  3. You get a bonus at work, you spend it on food, making meals cost more.

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Categories: Economics · inflation· money supply· economics basics· economic cycles