Why Are Things Getting More Expensive?
MINNEAPOLIS (WCCO) -- It is not your imagination -- prices are going up.
McDonalds, Chipotle, Netflix, Amazon, John Deere and more have all recently announced they are raising prices.
So, why are things getting more expensive? Good Question.
"Prices are going up partly because people have more income," said Jeanne Boeh, a professor of economics at Augsburg University.
There are two main ways for inflation to occur. The first is called "demand pull," and that is when people have more money, they demand more and, in turn, businesses charge more.
The second way is "cost push" inflation, when the inputs -- like gas or wages -- that go into a making a good or service rise.
Over the past five years, inflation measured by the Consumer Price Index has been below 2 percent. It rose to 2.1 percent in 2017.
"People feel it," Boeh said. "The status quo was lower declining prices and now when prices go up a little bit, it's like, 'Oh my gosh, this is terrible.'"
Boeh says the low unemployment rate and higher rate of growth have finally given customers and businesses enough confidence to spend and spend.
In 2010, the unemployment rate hovered around 10 percent. In April 2018, it was 3.9 percent.
"I think that people have to realize that in general, we're still better off than we were," she said. "It's just psychologically that hurts, it really hurts."
She does not expect prices to rise that much further because that will eventually mean people will stop buying the goods and services.
