Inflation is defined as a rise in the general level of prices over time. For some students, it can be difficult to comprehend unless they actually see it in action. It is an aspect of economics that can critically affect all types of decisions that people, governments, and businesses make. It is an element that is not only crucial to savers and spenders, but also to those looking to build a business, buy a house or car, make tax policies, or even best plan for retirement.

This simple 15- to 20-minute introduction to inflation can lead your students down the path to understanding how microeconomic and macroeconomic decisions are made. All you need are pennies and two identical objects. Once the concept is understood, it can be used as a springboard for discussing who is helped and hurt by inflation, why governments like to see a 2% inflation rate, and how the Federal Reserve and Congress can counteract an overheated or sluggish economy.

Tracy Lowd has taught AP^® Macroeconomics and Honors Gifted Economics at Southwest Miami High in Miami, Florida, for 14 years. She holds a certification to teach gifted and talented students, a Bachelor of Science degree in Secondary Social Studies Education from Florida International University and a Master of Education degree in Curriculum and Instruction with a focus on Secondary Literacy from American College of Education. She assisted in writing and reviewing for the AP® Macroeconomics coursebook from Perfection Learning^®.