What is Inflation? Back to School!

Why is everything so expensive these days? Enter special guest Veronika, who asks Ian Tam what causes it and whether it will get better

Ruth Saldanha 31 August, 2023 | 9:19AM
Facebook Twitter LinkedIn



Veronika Sholokh: Hi, my name is Veronika, and this is Ian Tam. I've found myself spending a lot more time on like things like snacks, art and everything really. But why does everything cost so much more these days? Today we're talking about inflation.

Hi, Ian. How are you?

Ian Tam: Hi, Veronika. I'm good. How are you?

Sholokh: I'm good. Thanks. What is inflation and what causes it?

Tam: Yeah, a great question, Veronika. So, I understand you have a dog and a cat. So, every so often we need to go to the store and buy them some food. So, let's say, a bag of dog food costs $10. Maybe in a couple of months, you go back to the store and that same bag of dog food now costs $13. That's basically what inflation is. Stuff costs more than it used to. And the reason is because the supply and demand of products and goods like dog food will change as supplies are reduced, some people say because of the global pandemic, some say there's other reasons for it, that ends up putting pressure on prices. So, that's why dog food ends up costing more than it did a couple of months ago.

Sholokh: Thank you. Why is everyone talking about it right now?

Tam: Yeah. So, I think many people are worried about it because your life ends up being more expensive. So, it means you need to make more money to be able to maintain a certain lifestyle or standard of living. So, a lot of people are quite concerned about that.

Sholokh: Okay. Will it get better?

Tam: Yeah. So, I think it will get better over time. So, I understand you also play volleyball. So, you have a coach I understand. So, the coach is responsible for making plays and making sure the team works together. So, in the world of finance, the coach is like the central bank. There's a bank in Canada that takes care of how much money is in the economy. They could take away money or add more money, and they use that as a tool to help control inflation, just like a coach would use certain strategies or plays to help you guys win the volleyball game. So, it will hopefully get better, but it will take some time and the bank needs to do their proper job and make sure that they keep inflation under control.

Sholokh: Okay. Thank you, Ian. For Morningstar, I'm Veronika Sholokh.

Get the Latest Personal Finance Insights in Your Inbox

Subscribe Here

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Ruth Saldanha

Ruth Saldanha  is Senior Editor, Morningstar.ca


© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures