English: Money makes the world go around

Money makes the world go around! But why is money so important? Money is central to everything we do on a daily basis. How many transactions do we make in a week? How many choices do we make because we do or do not have money? Money is important because of what it can do for us. It gives us the freedom to make choices; from basic choices related to what we will eat for dinner tonight to bigger choices, such as the city we can afford to live in. Money allows us to support our families, to give back to our communities and to support charities and causes that are dear to us. Money also allows us to get a good education, to secure a good job, to travel the world, to raise a family, etc. With money behind us, the world is our oyster! While money is not everything in life, and there are other things that we value more on a personal, social and societal level; money is one thing that we all need and that we all have in common. Every country in the world uses money as its main commodity to determine trades; to purchase goods and services, to collect taxes from citizens and businesses; to pay for healthcare, education and social services. All of these activities are included in each economy around the world, so money really does make the world go round!

But what happens when the value of money itself goes up or down? What if the value of money goes down so much that the money we have in our bank accounts is suddenly worthless? In this WebQuest, we will find out what happens in this situation. It may seem negative; but informed citizens are empowered citizens, so it is time to consider what can happen when our relationship and dependency takes a turn for the worse.

Key terms for you to consider in completing this WebQuest include:

Inflation: This refers to when there is a general increase in prices for goods and commodities; at the same time that there is a reduction in the purchasing value of money.
Deflation: This is where there is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. While inflation reduces the value of currency over time, deflation increases it; meaning that you can now buy more goods and services for your money. It sounds great, but over time it can cause economic collapse.
Speculation: This is where trades are made in the expectation of a significant return; but the trade comes with risks and could backfire.
Profit: This refers to a financial gain; in business a profit is typically the positive difference between money that is spent on buying goods, operating or producing something and that which is earned.
Offset: Have you ever heard of the term ‘hedging your bets’? Well this is the official term for doing just that. Offsetting is when a trader assumes an opposite position in relation to an original opening position in the securities market.

You have been reading about inflation in the Eurozone in recent history; tracking the history of inflation since the economic recession in the 1980s and the economic crises of 2008. You want to learn more about what inflation could mean for you and your family in the future. In the aftermath of the COVID-19 outbreak, experts around the globe are talking about the economic recession, and even depression, that may follow. Some experts are talking about how it could be the worst financial crash since the 1930s Depression. The impact of the 1930s Depression was so severe due to a rate of negative inflation, or deflation, in the early 1930s, as well as the rapid growth in unemployment figures and the loss of personal purchasing power for all citizens. Did you know that the rate of deflation stood at -11.38% in 1932? This is an unprecedented level of deflation. But what happens on the opposite end of the scale? In 1920s Germany, we saw instances of hyperinflation in the Weimer Republic. At this time, Germany was struggling to pay war reparations from WWI, and the government’s response was to print more and more money. This resulted in the value of money being depleted; which led to hyperinflation. In Weimer Germany, in January 1923 a loaf of bread cost 250 Marks; this price rose to 200,000 million Marks in December of the same year. This is hyperinflation and it is terrifying!

You find some of the predictions that we too could see record levels of inflation very worrying, like the rest of us. However, this is mostly because you don’t know what it will mean for you and your family. You decide that you will research what inflation is, and to understand what it means for your family. Knowing how your family could potentially be impacted by inflation will help you to prepare for any potentially negative economic aftermath of the public health crises of 2020.

To complete this WebQuest, you will complete the following three steps.

Research what inflation is?
Determine what the role of banks is in relation to inflation?
Understand what inflation means for you and your family?

What inflation is?

The first step to understand what inflation is and how it could impact your personal finances is to research the topic and develop your own understanding. The following links will help you to get a general grounding in the key terms you will need to understand, to be able to talk to your family about inflation.
[VIDEO] What is Inflation?
What is Inflation?
Inflation, How Its Measures and Managed

The next step in your progress towards understanding inflation is to determine the role of money in the economy, and the role that banks play in creating money. These might appear to be complicated tasks, but the following links will help you to develop your understanding of where money comes from and how it is the lifeblood of our economy. If you need some additional support, why not get your friends and family involved and ask them to help with these research tasks? The following links should be a good start for your research on these topics:
[VIDEO] Where Does Money Come From?
How Banks Create Money
[PODCAST] Functions of Money
No money, no inflation – the role of money in the economy

Another important issue to research at this stage is to determine our relationship with inflation through the economies of the world. As we live in Europe, we will just focus on the Eurozone economies at this stage. You will not conduct some research into the historic levels of inflation in Europe over the last 20 years; this will allow you to gain some sense of how our economies are shaped by inflation, and how they also shape the rate of inflation. This will allow you to also understand the impact that inflation can have on our economies. The following links will help you to research this topic, but go further with your own research. When you have completed your research, create a graph – it can be a table or flow-chart – to show the rate of inflation in your own country’s economy over the last 10-20 years, depending on the data available to you:
Euro Area Inflation Rate
Consumer price inflation in the euro area since 1961
Inflation, consumer prices (annual %) – European Union
What is the role of banks in inflation?

Great, now you understand what inflation is and how it has impacted our economies over the past two decades. So now you know what inflation is, but what causes it and where does it come from? In order to understand where inflation comes from, it is necessary to research the role that banks play in influencing inflation. The following links will help you to understand the relationship between banks, financial policy, interest rates and ultimately inflation. When you have mastered the topic and understand the role that banks play in influencing the rate of inflation, develop a hierarchy or an organisation chart to map out the relationship between banks and inflation.
To further deepen your understanding of this topic, re-visit the chart that you developed in step one, as assess the steps that were taken by the banks in your country to cause the rises and falls in inflation over the past 10 years in your national economy. When you have completed this research, create a timeline to represent the relationship between the action of the banks and the rate of inflation. This will be a useful reference tool to explain the relationship between banks and the rate of inflation to your family members. Using Google Slides or Google Docs to create this timeline means that you can easily share it online with family members, and invite others to collaborate to trace the timeline back further in history. For guidance on how to create a timeline, the following links might be useful:
- [VIDEO] How to Create a Timeline in Google Slides
- [VIDEO] How to Make a Timeline in Google Docs
While this is a nice trip down memory lane, your task here is to determine the reality of what inflation could mean for your family. For this, your next research task will have to focus closer to home and to present-day! Conduct some research to identify the main banks in your city or town. For each bank, either visit them in person or conduct research online to compare the offers that they have for people to open and manage personal accounts in their branch.

When you have completed this research, compile a list of the different offers available from banks in your city; and ask your parents, siblings, grandparents, aunts and uncles to talk about the different offers that the banks have at the moment. From this discussion, you are trying to gauge the thinking and attitude that all members of your family have towards the banks in your city, and towards money in general. This should be a fruitful discussion, so set aside some time to talk to all members of your family about money and local banks!
What does inflation mean for me and my family?

Now you understand what inflation is, how it has impacted our economies over time and how it is influenced by fiscal policies of the banks that set the interest rates; it is time to bring this information down to a more personal level and to determine the impact that inflation could have on you and your family. This represents the final piece of the jigsaw, and the following links can help you to complete this puzzle and determine how inflation could impact you and your family:
Now that you understand how your family can be impacted by inflation, and negative inflation or deflation, the most helpful thing you can do for your family is to advise them on the best habits and behaviours that they can choose for either eventuality. To complete your Quest, the final task is for you to compile a list of do’s and don’ts for your family to live by in case we see inflation or deflation as a result of COVID-19. The following links will help you to determine the habits we should all follow in both cases:

After complete this WebQuest, I can:

Recognise the role of banks in money creation	Yes	No
Relate money and inflation	Yes	No
Reflect about the role of money in the economy	Yes	No
Compare commercial banks ads in your city	Yes	No
Analyse inflation effect on people’s lives	Yes	No
Identify the different economic agents	Yes	No
Evaluate how money is perceived by people	Yes	No
Advise good attitudes in both low and high inflation	Yes	No
Represent the family role in the economy	Yes	No

*If you answered NO to more than half of the statements, you should go through WebQuest again and acquire more knowledge and skills if you answered YES to almost all questions; congratulations on your great success!

Through this WebQuest, you have learned about our relationship with money and how true the phrase is that ‘money makes the world go round’. In some form, money touches all people and communities on this planet. Although it is a man-made instrument, and before money people traded coins or bartered, money and the financial system has become an essential part of the structure of our economies and societies. By using money to pay for and set prices for energy, education, healthcare, labour market, transport and logistics and our legal system, the functioning of our society has become so intertwined with money that we cannot function without it. Within the financial system, prices rise and fall. These fluctuations are impacted by the global demand for commodities, and are also influenced by consumer and trader behaviour. For example, in years gone by oil was considered to be liquid gold; however, we saw during the COVID-19 lock-down of 2020 that the price of oil fell to a negative, i.e. below one dollar per barrel. This price-drop shocked the world when it happened, but when the population of the world were not travelling to work, when whole businesses and industries ground to a halt, when people could fly or travel abroad, the demand for oil plummeted along with the price. This shows the role that we, the consumers, play in influencing our economy and the power of our consumer behaviour to cause shockwaves through the financial world. So while money does make the whole world go round, we also have a role to play in influencing how money works!

Through this WebQuest, you have learned a lot about where money comes from, the role that banks play in creating money, what inflation is and how banks also have a role in inflation; and you have also learned of some good habits and behaviours that you and your family can exhibit when our economies experience inflation and also deflation. For many people, money is something for them to stress over and worry about; but in reality, understanding what money is, where is comes from and how it supports our economies is so important. Developing your financial literacy so that you understand money and its role in our lives is something that you will carry with you for your whole life. It is important that money isn’t something you fear or stress about, but rather that you understand it, and you know how to interpret what happens in national and international banking, so that you can adapt your spending behaviours accordingly. Knowing what to do in times of inflation, or deflation, and understanding how these different financial trends can impact your personal and family finances is the first step in taking control of your finances and being prepared for anything that the global economy throws at us!