Why Do Inflation Rates Go Up When People Are Feeling Down?

Imagine you're feeling really sad, and instead of saving money, you decide to buy a bunch of ice cream, just because. When lots of people do this at the same time, it makes prices go up. That’s how inflation can happen when we’re all in a bad mood.

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Examples

A class of students gets bad grades and spends all their savings on candy bars.
A family loses their job and goes out for a fancy dinner to feel better.
A group of friends feels lonely and buys ten pizzas at once.

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Categories: Economics · inflation,economy,behavioral economics,consumer psychology,economic cycles