Create account Log in

Why Do Inflation Rates Rise When Money Prints More Money?

Inflation is like when you have too many cookies in a jar. If everyone gets more money, they all try to buy the same number of cookies, but there aren't enough cookies for everyone. So each cookie costs more. That’s why printing more money makes prices go up.

Imagine your town has 10 people and 10 cookies. Everyone gets one cookie. Then, the town prints 5 more dollars, so now there are 15 dollars but still only 10 cookies. If everyone tries to buy a cookie with their new money, prices go up because there’s not enough to go around.

Take the quiz →

Examples

  1. When your town gives everyone extra dollars to spend on candy, but there's still only 10 pieces of candy, the price goes up.
  2. Imagine having 10 more bills in your piggy bank, but you still only have 5 cookies, each cookie costs twice as much now.
  3. Printing money is like giving everyone a new $20 bill to spend on pizza, but there’s not enough cheese for all of them.

Ask a question

See also

Discussion

Recent activity

Categories: Economics · inflation· money supply· economics· central banks· currency