The big ideaWhen there is too much money for the same goods, each note buys less.
How it works
Most of the time prices creep up a little each year. That slow creep is called inflation, and it is normal and hardly noticed.
In Quillby, a made-up village, the mayor printed lots of new notes, but there was not one extra loaf of bread. With more money and the same bread, each note buys less.
Prices doubled each night, so Dani spent her notes the moment she was paid. Notes saved in a jar bought less every day.
This has really happened, in the 1920s in one country in Europe. It ends when the printing stops and a steadier money takes its place.
The same ten notes buy less each day.A normal year and a runaway time.
Example 1: Doubling
Day 1: a loaf costs 2 notes.
Double it: 2 × 2 = 4 notes on day 2.
Double again: 4 × 2 = 8 notes on day 3, and 8 × 2 = 16 notes on day 4.
Example 2: How many loaves?
On day 1 a loaf costs 2 notes, and 10 ÷ 2 = 5 loaves.
On day 2 a loaf costs 4 notes: 4 + 4 = 8, so 2 whole loaves.
On day 3 it costs 8 notes, so 1 loaf. On day 4 it costs 16 notes, so none.
Example 3: Adding is not doubling
Adding 2 each night gives 2, 4, 6, 8.
Doubling each night gives 2, 4, 8, 16.
After three nights doubling reaches 16, but adding only reaches 8.
Example 4: What keeps its worth
A sack of flour is still flour tomorrow.
A jar of notes buys less every day.
So Quillby went back to swapping cloth for flour, and flour for bread.
Words to know
inflation
Prices rising across the shops.
barter
Swapping things instead of using money.
worth
What something buys or is good for.
runaway
Prices that race up, like doubling every night.
Watch out
More notes do not make people richer. With the same bread, each note just buys less.
Doubling is much faster than adding two.
When prices race, waiting means the same notes buy less.
A slow rise in prices, a little each year, is normal. A runaway time is rare.
Try it
A loaf costs 4 notes on day 2. It doubles on day 3. What does it cost?
Dani has 10 notes and a loaf costs 4. How many whole loaves?
What is it called when prices rise across the shops?
Why did Quillby go back to swapping things?
Answers: 1. 8 notes · 2. 2 · 3. Inflation · 4. Things kept their worth better than notes
Try at homeWith a grown-up, ask what a loaf of bread cost when they were your age. How much has it changed?
For grown-upsAsk a grown-up what a loaf of bread cost when they were your age, and see how much it has changed.
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