MWA#3 Research Paper

What is inflation and how is it going to affect me in the future? Well inflation is “the rate
of increase in prices over a given period of time”. To put it into simpler terms, it is basically the
rise of prices on all consumer goods and services making the cost of living more expensive
recorded typically annually.

Inflation is measured through what is called the Consumer Price Index (CPI). The CPI
provides a visual of the changes in prices paid by consumers. This is based upon the most
commonly purchased goods and services. We Americans get surveyed on what we prefer and
do spend the most of our money on and the four main categories covered are: food, energy,
commodities, and services such as mortgages, rent, and healthcare. The CPI measures the
percent change in the prices, therefore determining the rate of inflation.

According to Investopedia, there are three types of causes of inflation. The first listed is
demand-pull inflation which is basically where supply is not meeting demand, causing prices to
increase. The second is cost-push inflation which is when the cost of production increases and

in order to make a profit the businesses have to raise their prices on consumers. Lastly, we
have built-in inflation which occurs when workers are demanding higher pay and in order to
fulfill their needs the businesses raise their products or services prices.

Now that we understand what inflation is, how it is measured, and what some of its
causes are, let’s discuss how it affects consumers. The main negative affect of inflation is that
“unevenly rising prices inevitably reduce the purchasing power of some consumers, and this
erosion of real income is the single biggest cost of inflation.” Or to put into easier terms, it
means that the amount of money we have doesn’t allow us to purchase as much a before. Our
money is basically worth less. Some more unfortunate affects due to inflation are depreciated
value of pensions, savings, and treasury notes. That means that all of your hard earned money
that you saved for the better and your dedicated time spent working in a certain job position in
order to obtain a pension just slowly goes down the drain. And lastly when inflation increases,
so do interest rates. It is a big loss because for example while the value of your house I
dropping, the price you pay for necessities such as food and gas is increasing. Believe it or not
but as an economy inflation could be beneficial when not too high. A good inflation rate causes
consumers to purchase, before prices get too hectic.

In order to get a better understanding her are some prime examples of inflation in the
United States. According to Master Class Articles, in 1913 a gallon of milk cost 36 cents. In
2013, a gallon of milk cost $3.53. This just shows how the value of money has decreased.
Another example is the price of a cup of coffee, tin 1980 a up of coffee cost $3.14 and in 2020
it cost $4.43. That is a 41.1% increase in inflation. CNBC has statistics of more inflation rates
including gasoline which increased 38% from February 2021 to February 2022.

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In conclusion, inflation is going to have a negative affect on me. Inflation is predicted to

increase by 3.43% in the next 5 years which is around the time In should be graduating
college. This is a negative affect because the value of the money I have saved is going down
when I am going to be in search of a career. It is going to make the cost of living for me more
difficult and stressful.

Works Cited

• What is inflation and how is it measured? .USA. Nov 2021. https://usafacts.org/articles/what-

is-inflation-and-how-is-it-measured/?
utm_source=google&utm_medium=cpc&utm_campaign=ND-
Economy&gclid=EAIaIQobChMI5_Gh8_yO9wIVkhx9Ch18DwZDEAAYASAAEgI0zPD_BwE .
Accessed 12 Apr 2022

• Oner, Ceyda . Inflation: Prices on the Rise. F&D Article. https://www.imf.org/external/pubs/ft/

fandd/basics/30-
inflation.htm#:~:text=Inflation%20is%20the%20rate%20of,of%20living%20in%20a%20coun
try .Accessed 12 Apr 2022

• Floyd, David. 9 Common Effects of Inflation. Investopedia. Feb 8, 2022. https://

www.investopedia.com/articles/insights/122016/9-common-effects-inflation.asp .Accessed
15 Apr 2022

• Amadeo, Kimberly. How Inflation Impacts Your Life. The Balance, Dec 31, 2021. https://
www.thebalance.com/inflation-impact-on-economy-3306102#toc-inflations-winners-and-
losers .Accessed 15 Apr 2022

• Arends, Brett. Look Out— the inflation forecast is now flashing red. MarketWatch. Mar 10,
2022.https://www.marketwatch.com/story/uh-oh-this-inflation-forecast-is-now-flashing-
red-11646923258#:~:text=The%20bond%20market%20is%20now,seen%20from%202010
%20to%202020 .Accessed 15 Apr 2022

• Coffee Prices Adjusted for Inflation: US Inflation Calculator. US Inflation Calculator. April 12,
2022. https://www.usinflationcalculator.com/inflation/coffee-prices-by-year-and-adjust-for-
inflation/
#:~:text=Coffee%20Prices%20and%20Overall%20Inflation&text=For%20example%2C%20t
aking%20the%20pricing,41.1%25%20increase%20in%2040%20years .Accessed 15 Apr
2022