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Lesson plan · Money Fundamentals · Lesson 8

Inflation

Why prices rise, what it does to the value of your money, and how to think in "real" terms.

  • 45 minutes
  • Grades 9–12
  • Beginner
  • Activity: pairs
Present slidesWorksheet + keyStudent lesson

Objectives

Students will be able to:

  • Explain inflation and how it reduces purchasing power
  • Estimate a real return by subtracting inflation
  • Calculate how a price changes over time at a steady inflation rate

Materials

  • Slide deck and a projector
  • Worksheet (one per student)
  • The lesson's interactive (projected, or on student devices)
  • Exit ticket slips (bottom of the worksheet)

Key vocabulary

Real return
What your money earns after accounting for inflation. A rough estimate: your interest rate minus the inflation rate.

45-minute agenda

  1. 0–5 min

    Warm-up

    Post: “Name something that costs more now than it did a few years ago. Why do you think the price went up?”

  2. 5–12 min

    Direct instruction

    Present the lesson slides. Make sure students leave with these points:

    • Inflation = rising prices = each dollar buys less.
    • Real return ≈ your return minus inflation.
    • The Federal Reserve aims for about 2% inflation over the long run.
    • Long-term money usually needs to grow faster than inflation.

    Use the “See it” slide (What $100 buys with 3% yearly inflation) to make the idea visual.

  3. 12–17 min

    Worked example

    Walk through “When a raise is really a pay cut” on the slides. Pause before the result and ask students to predict it.

  4. 17–22 min

    Live demo

    Project inflation calculator from the slides. Change one input at a time and have students call out what they think will happen.

  5. 22–32 min

    Price Time Machine

    Format: pairs · 10 minutes

    1. Pairs pick three prices: a $5 lunch, a $60 video game, and $1,200 monthly rent.
    2. Using the inflation calculator at a hypothetical 3% a year, they find each price after 10 and 30 years.
    3. They find what $100 kept as cash would buy after 20 years.
    4. Discuss: what does this mean for money you won't need for decades?

    What to look for: At 3%: lunch ≈ $6.72 (10 yrs), $12.14 (30 yrs); game ≈ $81, $146; rent ≈ $1,613, $2,913. $100 in cash buys about $55 of today's goods after 20 years.

  6. 32–37 min

    Check for understanding

    Use the question slides — or run them as a Four Corners game. Answers:

    1. What happened to your money's purchasing power? — B. It fell about 2%.
    2. In real terms, what happened to your pay? — D. It went down about 2%.
    3. Keeping a large amount of cash at home for decades protects it from losing value. — False
  7. 37–42 min

    Discussion

    • Ask a parent or grandparent what something cost when they were your age. How much has it changed?
    • Who is hurt most by high inflation? Who might not be hurt as much?
  8. 42–45 min

    Exit ticket

    Prompt: Your pay rises 2%, but prices rise 4%. Did you get a raise? Explain.

    Answer: Not in real terms. Your purchasing power fell by about 2%.

Differentiation

Common misconception

“Cash under the mattress is perfectly safe.” It's safe from losing dollars, but not from losing purchasing power.

Support

Provide a table of 1.03 raised to powers 1–5 so students can multiply instead of computing exponents.

Extension

Research why the Federal Reserve aims for about 2% inflation over the long run instead of 0%.

Homework or make-up work

Students can complete the full interactive lesson — including its knowledge check — at learnwithflc.org/courses/money-fundamentals/inflation. No account needed; progress saves on their device.