In the past few months, Americans have seen a sharp increase in the price of many essential goods and services. With salaries staying the same, this inflationary trend has frustrated many people, leaving them concerned about the future.

The latest consumer price index (CPI) reports a 7.7% increase in inflation over the last year (a 40-year high). This inflation data shows that the average American family spends more each month to cover basic living expenses.

Why is Inflation So High?

People spent less, but cash was in surplus, driving inflation. America’s economic stimulus package was an additional influx of funds into the economy, further contributing to inflation.

Too Much Money in The System

All these got reinforced by shortages of everything from food to other household items, so people had less to buy. In the end, people started spending on whatever was left and, by so doing, bumping up the prices of these items.

When there is more demand for a good than available supply, the price goes up. People are willing to pay more for goods when they are insufficient, racking up inflation figures.

Supply and Demand Imbalances

At the height of the pandemic, when spending dropped and savings increased, the demand for goods and services decreased. But now that we have emerged from this crisis, people are more willing to spend, increasing demand.

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