Inflation: Watered down Lemonade

Lemonade_2Today we’re going to be looking at the idea of inflation and how it affected world economies during the Years of Crisis.

We started by reviewing the questions from yesterdays World Wide Depression questions.  Then, we had a demonstration of inflation using Lemonade.

Essentially:

  • Each student received a cup of full strength lemonade.  After enjoying a sip of the sweet and sour beverage, we doubled the amount of water in the mix.  This watered down the lemonade.  Everyone agreed that it still tasted like lemonade, but it wasn’t as good.
  • Then, we took another sip and added more water.  This time, everyone thought that it was getting watered down.
  • Finally, we took one more sip, added more water and at this point, everyone agreed that it barely tasted like lemonade and was mostly just water.

Lemonade

This is a metaphor for inflation and printing money.  Printing money, a.k.a. adding water, reduces the value of the existing money.  The lemonade, is it became watered down was ‘worth less.’

During the 1920, Germany experience periods of hyperinflation causing their country to crash.  We explored this idea a bit farther by looking at historical images of hyperinflation and imagining what the effects would be on our world today.  We finished up with the video below.