Syracuse, N.Y. (NCC News) —Bonita Johnson is experiencing the stressful impact of inflation. Johnson works two jobs to provide for her family, and that’s becoming increasingly difficult as the cost of everyday items increases.
Her pocketbook is taking a hit, especially when it comes to grocery shopping.
“Everything continues to rise. Packaging getting smaller but you’re paying more,” said Johnson. “So, you end up spending more anyways because if it doesn’t cover your family’s needs, you’re going to have to get extra just to make it work for your family.”
It’s easy to “feel” inflation when shopping, but what triggers inflation?
According to American University macroeconomics professor Evan Kraft, normally two elements trigger inflation.
“One thing that often happens is that the demand of the whole economy, what we call aggregate demand can be so high that it starts to drive prices up,” said Kraft.
This could also be referred to as ‘Demand-Pull Inflation’. The other one is called ‘Cost-Push Inflation’ or can be referred to as ‘Supply-Side inflation’.
For example, when workers know that companies need workers, they can ask for a raise or find a job with better pay. This can lead to companies raising wages, which could increase the demand side of inflation.
Raising wages is not normally what increases the demand side of inflation.
“There’s usually something that contributes to that higher demand. Often it is the government spending a lot of money so some of our biggest inflations have been due to that kind of situation,” said Kraft.
People tend to be more familiar with Cost-Push Inflation, according to Kraft.
“People I think really intuitively you know are familiar with and we’ve all had this in our own experiences, on the supply side, the most common thing is you get something like a big increase in oil prices,” said Kraft
For example, if oil prices start to rise then gas prices and the cost of other item start to increase as well.
This most famously happened in the 1970’s with oil. In 1973-1974, Arab countries boycotted buying oil from the United States and Israel.
This led to the beginning of the Organization of the Petroleum Exporting Countries (OPEC).
In 1979, a revolution in Iran led to a big disruption in oil prices as well.
If the cost of business increases and businesses raise their prices, then workers will want to be paid fair wages that reflect inflation. This can lead to a ‘wage-price spiral’.
Wage-price spirals are fairly rare.
Inflation can be triggered in different ways but whether federal policy makers, like the Federal Reserve or the president, effectively handle inflation remains a big question.
Johnson is not convinced that they can.
“I can’t see at the end of the tunnel so hopefully things will work out sooner rather than later. But right now, it’s like go with the flow and deal with it,” said Johnson. “We really don’t have a choice because some people may have to skip a bill to feed their family.”