Lesson 2: Lesson 2: Inflation & The Mechanics of the Money Supply

Why does a dollar buy significantly less today than it did for your parents or grandparents?

What happens to a society when the general price level moves faster than worker wages?

Inflation

Deflation

Consumer Price Index (CPI)

Purchasing Power

Hyperinflation

T Social Studies Standard: 7.Eco.12.a — Explain how economic fluctuations and cycles affect individuals and groups in a region (e.g., deflation, inflation, unemployment, depression, recession). CT Social Studies Standard: 7.Eco.6.a — Explain how changes in supply and demand have influenced the price and quantity of a good or service in a region.

Words in Context / Cause-and-Effect Relationships: Students dissect historical, non-fiction informational excerpts outlining high-inflation historical eras (like the 1970s stagflation crisis or post-WWI Germany). They will identify explicitly stated and implied macroeconomic cause-and-effect relationships.

Students explore why money loses its purchasing power and how price volatility impacts consumers. Through tracking a stylized "basket of goods," they calculate CPI and map out inflation triggers. The lesson culminates in a simulation where students witness how printing excess money erodes currency trust.

This lesson serves to bridge aggregate output (GDP) with the real-world daily purchasing friction felt by families, anchoring money supply concepts.

Estimated DOK Level: 2 (Basic Application of Skills and Concepts)

Students will examine the recent 21st-century inflation spikes in local grocery stores, gas pumps, and sneaker resale apps, diagnosing whether the issues stemmed from supply chain stalls (cost-push) or stimulus injection waves (demand-pull).

Students often think that inflation means a country is running completely out of physical goods or that all inflation is universally malicious for an economy (ignoring that stable 2% inflation signals healthy demand).

Structured Math Scaffolding: Provide a structured formula mat for calculating percentage changes to assist students struggling with multi-step percentage mechanics.

Data Literacy Exit Ticket: Provide students with a mini-CPI baseline table. Have them accurately calculate the inflation rate between two benchmark years and state if a consumer's purchasing power grew or shrank.

Or

Curent events and Inflation: Research current articles on Inflation with accompanying questions set and recommendation request for the government. 

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• U.S. Bureau of Labor Statistics CPI Databases

• Federal Reserve Bank of St. Louis (FRED) Economic Data Graphs