Why are prices going up? (Medium)

Hello. This is 6 Minute English from BBC Learning English. Im Rob.

Beth

And Im Beth.

In this programme, were talking about money  � and Beth, as the old saying goes, money makes the world round!

Beth

You mean its very important and lots of things couldnt happen without it. Well, we all money  � but have you noticed how our money doesnt seem to buy so much these days?

Rob

, I have Beth. It seems like consumers like us are being hit in the pocket at the moment  � by that, I mean we have less money to spend.

Beth

Now, Im no economist, but I know has a lot to do with inflation - the increase in prices of things over time.

Rob

Its big problem globally, and Beth my question for you is about inflation. According to one report, what was the inflation rate in Venezuela between November 2017 and 2018? Was it:

a) 130%

b) 1,300% or

c) 1,300,000%?

Beth

Ill say b) 1,300%

Rob

OK. Well find out youre right later on. But lets talk more about money and inflation now. Around the world, prices of things rising more than normal, and more worrying is that prices keep going up.

Beth

Two things in particular increasing in price  � energy, like gas and electricity, and food. These are things we need and depend on. , whats causing the rises?

Rob

There seem to be two main reasons  � the Covid pandemic and the in Ukraine, which has reduced the supply in things we need. And when things are in short supply  � in limited quantities - prices go up.

Beth

The BBC World Service programme The Real Story discussed this much more detail. One expert, economist, writer and broadcaster, Linda Yueh, explained how price rises could be around for while…

Linda Yueh, economist, writer and broadcaster

Even if you take out some of these volatile items like and energy, the sustained price increases weve had, it is actually getting passed through into how companies price their and services. and that's where it gets extremely worrying because that suggests that even if energy prices, food prices, down, we could have inflation now in the system and I think that for advanced economies is worrying, for countries, that's hugely worrying.

Rob

Linda Yueh used some interesting language there. She talked about food and energy volatile items  � something that is volatile is unpredictable and can change suddenly. And thats what weve experienced with and energy prices.

Beth

Yes, and she said these price increases have been sustained  � so, continuing at same level for a long period of time. But Linda Yueh says that even if energy and food prices come down, companies will pass on the extra costs they have already faced by charging more for their goods services.

Rob

And this could cause inflation  � theres that word again. Continuing price rises arent good for but especially for people in developing economies  � countries which have industry thats less developed and have lower living .

Beth

Another possible consequence of inflation is recession  � this economic term describes a situation where a countrys starts going down, peoples incomes go down and unemployment goes up. This all sounds like a very bleak economic . So, what can be done?

Rob

Well, thats the million-dollar question, and economists are trying to work it . Speaking on The Real Story programme, economist Vicky Pryce gave an overview of how to control inflation.

Pryce, economist

One of them, something that is actually most effective, is by slowing down demand. And if you interest rates, what you do is you discourage people from borrowing, whether they are individuals or whether they are - and of course the economy starts slowing down.

Rob

So, she says what is most effective  � what works well and gets the best results  � is slowing down demand. Increasing interest rates can do this people will borrow less money. Interest rates are fees banks and financial institutions charge you for borrowing money.

And if we borrow less money, we buy fewer things, which can reduce inflation. I think it makes sense ! And if you were in Venezuela in 2018, you would really want inflation to go down, wouldnt you?

Yes. Now, earlier I asked you what one report said the inflation rate was there between November 2017 and

Beth

And I said a very high 1,300%.

Rob

Well, it was even higher, Beth. According to study by the opposition-controlled National Assembly, the annual inflation rate reached 1,300,000% in the 12 months to November 2018. extreme financial situation was known as hyperinflation.

Beth

Thats not good at all. In this programme, we have talking about inflation  � thats the increase in prices over time.

Rob

Other vocabulary we used included the hit in the pocket  � which means you have less money to spend.

Beth

Volatile describes something that unpredictable and can change suddenly.

Rob

Something that is sustained continues at the same level for a long of time. And something that is effective works well and gets the best results.

Beth

And interest rates fees banks and financial institutions charge you for borrowing money.

Rob

Well, we hope youve found our brief about the economy useful. Thanks for listening. Goodbye for now!

Beth

Bye bye!