Introductory Inflation

Thanks for sharing this!

How much money does it take today to buy a gallon of gas that cost $1.25 yesterday? If the answer is $2.00, you have inflation.

Inflation means an increase the general level of prices. The conditions leading to rising prices are many and varied. For example, supply and demand can be one cause. Let’s say oil production falls, but demand remains the same. The price goes up.

The impact on you: The cost per gallon of gasoline rises. That leaves you with less money for buying other goods or for saving.

A plus: Industry might develop new technology for finding more energy efficient fuels at lower prices.

Government spending can also be an inflationary factor. When deficits outpace the money supply, the Federal Reserve Bank could try to compensate by printing more money. Additional money in circulation can overbalance economic growth by reducing purchasing power, which leads to inflation. The Fed may attempt to head off the inflation by raising interest rates.

The impact on you: Higher interest rates lead to higher borrowing costs. Major purchases such as a new home or car could be out of reach.

A plus: If you own fixed-income investments, such as certificates of deposit or Treasury securities, a rising interest rate may increase your income.

You might also like these posts

Article – Preparing for Hurricane Season Image source: By Nilfanion , via Wikimedia Commons. The map shows the tracks of all tropical cyclones which formed worldwide from 1985 to 2005.The Atlantic hurricane season begins June 1. While the 2014 season is expected to be a mild one, mild doesn’t mean storm-free. Getting ready early is a good idea—and early preparati...
Article — Locked Out Image source: UK, public domain, via Wikimedia Commons What’s on your computer? Your manuscripts? Work? Photos? What would you do if you were denied access to those files—if you were locked out by rogue hackers? If you’re shaking your head because you think nothing on your computer is of value to hackers, consider th...
Article — Tax Identity Theft Awareness Week Image source: Taxes are scary enough, without adding tax identity theft to the mix. The costs—$3.6 billion a year according to an estimate by the US Treasury Inspector General for Tax Administration—are scary, too. Unfortunately, both tax ID theft and the costs are on the rise. The US Federal Trade Commission...
Article — Your 2013 Federal Income Tax Return Image source: Whether you’re a part- or full-time freelancer, receiving income means filing a tax return. Here are three things to keep in mind as you look back at your 2013 business activity. Dates: The IRS will begin accepting 2013 business returns on Monday, January 13, 2014. For individual returns, the da...

We write. Visit us in Carpenter Country, a magical place that, like our stories, is unreal but not untrue.

Posted in Articles Tagged with: ,