What is inflation? Economics explained — Transcript

Full transcript

1. 0:00[Music]
2. 0:01when McDonald's launched the Big Mac in
3. 0:031967 it cost just 45 but the same Big
4. 0:07Mac now cost
5. 0:09$3.99
6. 0:10why the answer is inflation to see how
7. 0:14fast prices are rising everything from
8. 0:16the price of a leg wax to the cost of a
9. 0:18bottle of whiskey are closely monitored
10. 0:20by statistical bureaus these changes in
11. 0:23prices are entered into a calculator and
12. 0:25out comes one single percentage number
13. 0:27the rate of inflation and this number
14. 0:30helps government set welfare payments
15. 0:32and helps you decide how much to ask
16. 0:33your boss for a pay rise in a stable
17. 0:36economy prices usually go up steadily
18. 0:38over time by 1 or 2% a year but
19. 0:41sometimes things get out of hand in 2008
20. 0:44prices in Zimbabwe doubled every 24
21. 0:47hours the government printed more and
22. 0:49more money before long everyone was a
23. 0:51trillionaire things got so bad that the
24. 0:54country ran out of paper to print all
25. 0:56the bank notes once an inflationary
26. 0:58spiral like this begins it's almost
27. 1:00impossible to get out of and governments
28. 1:02must either devalue their currency or
29. 1:05ditch it all together this is what
30. 1:07happened in Germany in the 1920s so is
31. 1:10inflation bad not so fast a small amount
32. 1:13of inflation is usually seen as a good
33. 1:15thing it helps keep an economy growing
34. 1:17and it also staves off the threat of
35. 1:19deflation and a bit of inflation is good
36. 1:21news if you're in debt just ask anyone
37. 1:24who took out a mortgage on a low
38. 1:25interest rate before a property boom but
39. 1:28it's bad news for Savers just as
40. 1:30inflation eats into debt it also eats
41. 1:32into savings 00 stashed in your piggy
42. 1:35bank will buy you less in 5 years time
43. 1:37than it will today if your income isn't
44. 1:39keeping up with prices you're getting
45. 1:41poorer for one of the most important
46. 1:43Concepts in economics it's also one of
47. 1:45the simplest inflation is just the
48. 1:47average rate that prices are rising