Hello. This is 6 Minute English from BBC
Learning English. I’m Rob.
And I’m Beth.
In this programme, we’re talking about money -
and Beth, as the old saying goes,
money makes the world go round!
You mean it’s very important and lots of
things couldn’t happen without it.
Well, we all need money – but have you noticed
how our money doesn’t seem to buy
so much these days?
Yes, I have Beth. It seems like consumers
like us are being hit in the pocket
at the moment – and by that, I mean
we have less money to spend.
Now, I’m no economist, but I know this has
a lot to do with inflation - the increase
in prices of things over time.
It’s a big problem globally, and Beth my
question for you is about inflation.
According to one report, what was
the annual inflation rate in Venezuela
between November 2017 and 2018?
Was it: a) 130% b) 1,300%
or c) 1,300,000%?
I’ll say b) 1,300%.
OK. We’ll find out if you’re right later on.
But let’s talk more about
money and inflation now.
Around the world, prices of things are
rising more than normal,
and more worrying is that
prices keep going up.
Two things in particular are increasing
in price – energy, like gas and electricity, and food.
These are things we need and depend on.
So, what’s causing the rises?
There seem to be two main reasons – the
Covid pandemic and the war in Ukraine,
which has reduced the supply in things we need.
And when things are in short supply – available
in limited quantities - prices go up.
The BBC World Service programme
The Real Story discussed this
in much more detail.
One expert, economist, writer and
broadcaster, Linda Yueh, explained how
price rises could be around for a while…
Even if you take out some of these volatile
items like food and energy, the sustained
price increases we've had, it is actually
getting passed through into how companies
price their goods and services.
and that's where it gets extremely worrying
because that suggests that even if energy
prices, food prices, come down,
we could have inflation now in
the system and I think that
for advanced economies is worrying,
for developing countries, that's
hugely worrying.
Linda Yueh used some interesting
language there.
She talked about food and energy being
volatile items – something that is
volatile is unpredictable
and can change suddenly.
And that’s what we’ve experienced
with food and energy prices.
Yes, and she said these price increases
have been sustained – so, continuing
at the same level for a long period of time.
But Linda Yueh says that even if energy
and food prices eventually
come down, companies will pass on the
extra costs they have already faced by
charging more for their goods and services.
And this could cause inflation –
there’s that word again.
Continuing price rises aren’t good
for anyone but especially for people
in developing economies – countries
which have industry that’s less developed
and have lower living standards.
Another possible consequence of inflation
is recession – this economic
term describes a situation where a
country’s production starts going down,
people’s incomes go down
and unemployment goes up.
This all sounds like a very
bleak economic outlook.
So, what can be done?
Well, that’s the million-dollar question,
and economists are trying to work it out.
Speaking on The Real Story programme,
economist Vicky Pryce gave an overview
of how to control inflation.
One of them, something that is actually
most effective, is by slowing down demand.
And if you increase interest rates, what you
do is you discourage people from borrowing,
whether they are individuals or whether they are businesses - and of course the economy
starts slowing down.
So, she says what is most effective –
meaning what works well and gets the
best results – is slowing down demand.
Increasing interest rates can do this because
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 now!
And if you were in Venezuela in 2018, you
would really want inflation
to go down, wouldn’t you?
Yes. Now, earlier I asked you what one report
said the inflation rate was there between
November 2017 and 2018.
And I said a very high 1,300%.
Well, it was even higher, Beth.
According to a study by the opposition-controlled
National Assembly, the annual inflation rate
reached 1,300,000% in the 12 months
to November 2018.
This extreme financial situation was
known as hyperinflation.
That’s not good at all.
In this programme, we have been talking about
inflation – that’s the increase in prices over time.
Other vocabulary we used included the
expression hit in the pocket – which
means you have less money to spend.
Volatile describes something that is
unpredictable and can change suddenly.
Something that is sustained continues at the same level for a long period of time.
And something that is effective works
well and gets the best results.
And interest rates are fees banks and financial
institutions charge you for borrowing money.
Well, we hope you’ve found our brief lesson
about the economy useful.
Thanks for listening. Goodbye for now!
Bye bye!