This year, the inflation rate hit a staggering 7.9%, the highest since the January of 1982. There are many causes that shaped this inflation but the main one is said to be the supply chain issue that is resulting from Covid.
“I sure think that Covid was a major cause of this inflation that we are in,” economics teacher Theisen Healey said.
The supply chain issue began because consumer demand exploded as vaccines were starting to become available and created a lag in shipping centers like ports that were not ready to ship and receive so much cargo. According to AARP, the increased cost of shipping and importing things raised prices for many items like artificial meat, poultry, fish and eggs.
“It’s interesting how manufacturers don’t change prices, but give less to the consumers. Some examples are things like soap, and I feel like this a reason why our grocery bills have gone up permanently,” Healey said.
This is called shrinkflation. Shrinkflation is a practice made by companies that don’t want to raise their prices, but still want to make profit. So they reduce the size of the product and sell it for the same price to respond to inflation. According to the Business Insider, paper towels from Walmart fell from 168 sheets per roll to only 120 sheets and the price stayed the same. One way companies engage in shrinkage without the knowledge of consumers is by decreasing the product but not changing the size of the packaging. One carton of Tillamook ice-cream decreased from 56 ounces to 48 ounces, but the size of the cartons did not change.
Inflation also affects the purchasing power of consumers because they buy fewer goods and services with the same amount of money. This is widespread and even reaches WJ students.
“I think it might make our purchasing power in G-Square go down. A lot of students go there every day so I think that might be where it affects us the most,” sophomore DECA and Business Club member Yashu Jayakumar said.
Meaning, that it also causes the cost to do activities to go up even if it was the same exact activity before a high inflation rate.
“I think the cost to go to field trips might have increased, and I feel like it might make it even harder for us to go to them,” sohopomore AP Macroeconomics student Joseph Peter Kang said.
There are already steps taken to set the economy back and decrease the inflation rate. On March 16, 2022, the Federal Reserve Bank announced to increase interest rates by 25 basis points. Raising interest rates is like a gas pedal that the Fed uses for the economy so that it becomes harder to borrow and lessen the desire to spend. This will stabilize the economy by gradually slowing the flow of money.
“The economy is cyclical, inflation comes and recession comes, and that’s how the economy is balanced. So good times don’t always last but bad times also don’t last too,” Healey said .
