By Jillian McIntosh
On Feb. 10, the U.S. Bureau of Labor Statistics reported that consumer prices rose 7% in December, the highest inflation increase since 1982.
Albert Sumell, economics professor at Youngstown State University, said inflation is a general increase of the price of goods and services, which reduces the purchasing power of a dollar.
“If inflation is 7% — which it was most recently — the value of a dollar has declined by 7%,” Sumell said. “Over the past 30 years, it’s never exceeded even 5%.”
Sumell also said inflation is judged relatively on the amount of goods and services produced and the collective income increase of individuals.
“You can have high inflation and most people won’t be worse off if their income is increasing by more than that inflation,” he said. “If you see that inflation is 7% but your income is increasing by 10%, you’re actually still better off than that.”
The pandemic is a key reason for high inflation.
Senior lecturer of economics Sarah Jenyk said inflation is caused by either supply disruptions or increases in demand for goods and services.
“We are seeing both as a result of COVID-19. As the economy is opening back up, consumers are eager to get out and spend,” she said. “Simultaneously, supply chain disruptions are causing shortages for many businesses, which also puts upward pressure on price.”
The greatest annual increase of inflation are the prices of gasoline and used car sales. These spending categories impact college students who commute or are interested in buying a vehicle.
College students can budget and adjust their spending and savings accordingly.
“It is important to reevaluate your budget, given the new price constraints,” Jenyk said. “If you need to have more money set aside each month for gas and groceries, you may need to cut spending in other areas.”
Investing in certain assets such as stocks or real estate is a way to sustain or outpace long-term inflation.
Economics junior Jakob Peters said the cost of rent and tuition have also been affected.
“Over the past few decades or so, the cost of both have risen dramatically,” he said. “It’s not really unreasonable to think that rent and tuition can be increased more, just so the university and landlords can keep up with that [inflation].”
According to Jenyk, the Federal Reserve may raise interest rates in the future to accommodate the high levels of inflation.
“Analysts are projecting that inflation will return to more typical levels by 2023,” she said.
Borrowing money for consumers and businesses will become more expensive and will cause investors to become more likely to make saving opportunities.