Lesson Overview
Featured Article: “Inflation Has Arrived. Here’s What You Need to Know.” by Jeanna Smialek
Have you noticed any prices going up? Say for food, gas or rent? Or for things like bikes or burritos?
The Times reported on Jan. 12 that inflation, as tracked by the Consumer Price Index, is rising at its highest rate since 1982. But what exactly is inflation, what is causing prices to go up and why are many economists worried about its continued rise?
In this lesson, you will learn about inflation and what the current rise in prices means for you, your family and your community. In a Going Further activity, you will act as an economic adviser to President Biden and make a recommendation for how to best tackle the problem.
Warm-Up
What do you know about inflation? What do you want to know?
Have you and your family talked about rising prices? Has the higher cost of things affected what you buy and whether you save money?
Watch the two-minute video above by the BBC News explaining what inflation means and why it’s happening now in Britain. Then, in writing or through discussion with a partner, respond to the following prompts:
In your own words, what is inflation?
According to the video, what is one reason inflation is happening right now?
How does inflation affect consumers?
Part 2: Analyze and Interpret a Graph
Look closely at the graph above showing the year-over-year percent change in the Consumer Price Index — the annual change in prices for a basket of goods and services — in the United States since 1965. Then, respond to the following questions drawn from our What’s Going On in This Graph? feature:
What do you notice about the year-over-year percent change in prices over the past half century?
What do you wonder? What questions does the graph raise?
What’s going on in this graph? Create a catchy headline that captures its main idea.
Finally, make a prediction: Based on what you learned from both the video and the graph, do you think inflation will continue to rise? Or do you believe the increase is a temporary problem?
Questions for Writing and Discussion
Read the featured article, and then answer the following questions:
1. Ms. Smialek writes: “Inflation has become central to the American zeitgeist in 2021 in a way that it hadn’t been for decades.” Give two examples from the article that support her observation.
2. The article defines inflation as “a loss of purchasing power over time.” In your own words, what is inflation? Use some concrete examples from everyday life to make your definition understandable to a fourth grader. What is the Consumer Price Index?
3. Why is a little bit of consumer price inflation generally viewed as desirable, according to the article? What roles does the Federal Reserve, America’s central bank, play in keeping prices from increasing too rapidly?
4. What are typical causes of inflation? What does Ms. Smialek mean when she writes: “The inflationary burst America has experienced this year has been driven partly by quirks and partly by demand.” Give an example of each.
5. Economic forecasters are divided about the future of inflation in the United States. Give one example to support the idea that “the price burst will fade,” as Ms. Smialek writes, and one to support the view that there are “concerning signs that inflation is becoming stickier.”
6. How does inflation impact different groups and institutions, such as borrowers, lenders, workers, banks and the stock market? Why can inflation be particularly hard on lower income households, according to the article?
7. What new things did you learn about inflation by reading the article? What details, lines or statistics stand out? Return to your prediction in the warm-up activity? Do you think prices will continue to increase and perhaps become a permanent feature of the economy or is inflation a transitory phenomenon? What evidence in the article leads you to this conclusion?
Going Further
Option 1: Learn more about inflation and the state of the U.S. economy.
Inflation is high and has been for months. It’s weighing on consumer confidence, making Washington and policymakers nervous, and threatening to eat away at household paychecks well into 2022. What questions do you still have about inflation and the state of the U.S. economy? What else do you want to know?
You might begin by looking at The Times’s Economy topics page, or by reading one of the articles on inflation and its impacts below. Then, write or discuss with a partner: What is your reaction to the article? How did it add to or change your understanding of inflation? What was the most fascinating, provocative or memorable thing you learned? What questions do you still have about inflation?
Option 2: Interview a family member about the prices of goods when they were young.
One fun way to learn more about inflation is to talk to an elder. Ask a parent, grandparent or older family member or friend what prices were when they were children for at least three of the items on the list below:
A candy bar
Milk
A hamburger
A movie ticket
A gallon of gas
A car
College
Make sure to write down both the estimated price of the good and the approximate year. Then, do some research, either by visiting local businesses or by hunting online, to find out what the price is now for the same good.
Next, after you have gathered the information about prices then and now, make some observations: What do you notice? What do you wonder? What does the information you’ve gathered tell you about inflation and the change in prices over time?
Afterward, share your findings with your class and plot the information on a rough timeline of prices.
Option 3: Make a recommendation.
Inflation in the United States is rising at its fastest rate so far this century. At 7 percent, according to one index, inflation is more than triple the Federal Reserve’s target. While much of what’s happening is related to the pandemic and surging demand as the nation struggles to return to something resembling normalcy, Republicans have latched onto the issue, blaming President Biden for the economic situation.
Imagine you are an economic adviser to Mr. Biden: How concerned should we as a nation be about inflation? What should the Biden administration do to address it?
For example, should the president recommend that the Federal Reserve raise interest rates? Should he consider price controls or cut government spending? Or would you counsel him not to worry because the economy is generally strong and the inflation is likely to be a temporary phenomenon?
To help formulate your recommendation, you might read one or more of the Times articles and Opinion essays below:
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