Question 12 - Reading: Level E Practice Test for the TABE Test

Does it ever feel like life is getting more expensive? That may be because of inflation. When goods and services cost more, it is called inflation. Higher prices can sneak up on you. What starts as paying a little more for a gallon of milk or a pair of shoes soon spreads to paying more for almost everything you buy.

Some rise in cost is expected. We certainly pay more for that gallon of milk today ($4.33) than we did in 1950 ($0.83). But when prices rise unexpectedly or go up too fast, it can be hard for people to afford to buy things. The value of money goes down and you need more money to buy the same products. This includes basic needs like housing, food, and electricity.

To help keep inflation under control, the government may raise interest rates. This means that it costs more to borrow money from the bank. Higher interest rates mean people pay more for “big ticket” items like homes and cars, which most people need to borrow money to purchase. Workers may demand higher pay to help cover the cost of more expensive goods. But this can add to inflation as companies start to charge customers more to earn more money to pay their workers.