You Draw Inflation ๐Ÿ“ˆ

visualization
Author
Published

April 25, 2024

INFLATION - we love it! We hate it. (Hm, we probably just hate it.)

But it seems we love reading about it. Which is not really surprising: inflation and the economy have a significant impact on our livelihoods.

So you might have already heard the good news: itโ€™s coming down! ๐Ÿ“‰โœ…๐Ÿ˜€ (disclaimer: some places and things!)

But what does reducing inflation mean about prices?

Rather than give you spoilers, hereโ€™s a playground where you can draw inflation and see ๐Ÿ‘€ the related price effects.

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Itโ€™s setup with a constant 10% per annum inflation rate, but you can drag that inflation rate handle up or down, and then make it your own scenario by touch or drag to create new handles.

On a desktop, double click or shift-drag to remove handles: fewer handles may be useful to be more deliberate.

Pre-defined scenarios:


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Inflation rates are annual rates which are converted for calculations carried out at monthly intervals. Linear interpolation is applied between handles, first. Interpolated values are indicated by steps in the red line.

Price values are expressed relative to a base: 100% at start of month 0. The price y scale begins at 75%: not 0% (so itโ€™s misleading to interpret using height relativities alone: you must refer to the y scale)

A note to teachers ๐Ÿง‘โ€๐Ÿซ

If you wish to use and modify this interaction in a lesson about inflation, then you can.

If you wish to use it in a different lesson (like calculus), then you can also talk to me to make it better.


Playground vs. reality

In the real-world, inflation figures are determined from price observations.

In this playground, itโ€™s the other way around!

Iโ€™m not an economist, but I suppose an economist might clarify about the real-world that inflation figures donโ€™t determine future prices. (But they may have some effect on expectations)


A challenge!

If youโ€™re up for a challenge then hereโ€™s a hard one:

Model the Nixon scenario.

Quoting from a notice in the American Mathematical Society:

In the fall of 1972 President Nixon announced that the rate of increase of inflation was decreasing. This was the first time a sitting president used the third derivative to advance his case for reelection.

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