Why Is Inflation So High?

We quiz Talan Iscan, economics professor

- Courtney Shea

We've always had inflation-but why? Is it a good or a bad thing?

Inflation is the rate at which the prices of goods and services increase over time. If the inflation is two per cent, a pack of gum that costs one dollar this year would cost $1.02 next year. People tend to think of it in negative terms things getting more expensive is bad. But a modest amount of inflation is a sign of a growing economy where demand is greater than supply, which raises the value of goods and services. This typically corresponds to low unemployment and, depending on several other factors, can also indicate prosperity.

When prices drop, it's usually due to low demand and is a sign of a recession or depression, which usually leads to high unemployment. As long as unemployment is low, the ideal inflation rate ranges between zero and five per cent.

Canadian inflation hit a 30-year high5.7%-in February. Is that because of the pandemic?