Glossary of economics

Ever wondered why your savings don't keep up with rising prices?

Imagine saving money to buy a new bike, but the price keeps going up because of inflation.

Your money buys less over time as prices rise, which is why your savings might not seem to grow as much as you'd expect.

Example

You save 100, but the bike now costs 110 due to inflation.

Remember this

The Fisher Effect explains that real interest rates remain stable despite inflation changes.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

Related concepts

Interest rate

Raising interest rates makes borrowing more expensive

Liquidity trap

Interest rates near zero lower bound

Deflation

Deflation increases the real value of money

Money supply

Money supply influences inflation

Paradox of thrift

Paradox of thrift: individual saving decreases aggregate demand and gross output

Economic growth

How does more money, people, and machines affect a country's wealth?

Educational content, not financial advice.

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