00:01Grandpa was right when he said movie tickets cost a dollar back in his day.
00:05He was also probably making about $10,000 a year, so it's all relative.
00:10This rise in general prices over time is called inflation.
00:20Since 1992, yearly inflation has risen between 1.6% and 3.8%.
00:26This number is determined through extensive research from the Bureau of Labor Statistics,
00:31which studies product and service prices on a yearly basis.
00:35Inflation makes it seem like prices are rising, but it's actually because the value of money is dropping.
00:41The two main causes of inflation are how people perceive the value of their money and supply and demand.
00:47In reality, our money is only as valuable as we say it is.
00:51Back when we had the gold standard, we could at least say that X dollars equaled X amount of gold.
00:57But even then, prices would vary based on people's belief that the government had the gold to match the cash.
01:03Today, values are even more subjective.
01:06That's where supply and demand comes in.
01:09The more dollars there are in circulation, the less value they have.
01:13So as economies grow and more of a currency is distributed, the value of that currency will decline.
01:19Massive and unexpected rises in inflation can be disastrous.
01:23So the Fed does its best to manage inflation by setting interest rates and trading bonds.
01:28Still, persistent inflation isn't going away.
01:31So be prepared to tell your grandkids about when your movie tickets only cost $10.
01:37Coinage, life well spent.
01:41Presented by GEICO.
Comments