Economy
If you want to understand the economy, you need to have an understanding of inflation. When prices go up, this can be likened to too much money for too few goods. Inflation is not hard to understand, nor is it hard to understand how it affects the economy. For example, if there is a pest that attacks the corn crops, that would mean that there would be less corn available for the consumers. What corn is available would be priced higher than usual. However, when inflation or deflation occurs, it changes the price of most goods and services in the marketplace.
The economy is also affected by how much money is circulating in the system. For instance, if the government decides to make or print more money, then there is more money in circulation. What does this mean for us? It means that we have the money to pay for the scarce and high-priced corn, but it also means that the value, or price of the corn, would change in relation to the money which is being circulated.
The economy is based upon inflation when the money supply goes up or down, or when the demand for goods goes up and down. To get an inside look at the economy and inflation, one only has to look at the 1970s.
One important factor in the 1970s economy was the increase in the price of oil. This was the result of oil embargoes by OPEC. This rise in oil prices led to an increase in costs to many industries, which in turn led to higher prices for the consumer. At this same time, unions were able to obtain generous wage increases for their workers. With workers making more money, they were able to afford or absorb the rise of prices. The money supply grew, but the costs of goods and services changed, as well.