Here, I found a nice simple big-bird style blurb for you to print out and have someone read to you about how inflation works.
Something Besides Money Growth Causes Inflation? It Just Ain't So!
By Howard Baetjer, Jr.
"So what does cause inflation? Well, what or who increases the money supply? Central banks do. In the United States, the Federal Reserve System (the Fed) controls the money supply and thereby causes any inflation that occurs.
Let us look at some of Samuelson?s specific points. He implies that high oil prices are driving inflation when he writes, ?We all know about oil. Prices are about $60 a barrel,? and he asserts that government spending drives inflation when he writes, ?[T]he government?s subsidies for corn-based ethanol are worsening inflation.? Samuelson is surely correct that government should not subsidize ethanol and thereby push up the prices of corn and all things made with corn. But high oil prices and government spending on ethanol do not change the money supply, so they cannot change the level of prices.
Surely higher prices for oil and corn drive up the prices of goods and services produced using oil and corn, such as transportation and many foods, so we should expect to see higher price levels in those sectors of the economy. But inflation is an increase in the prices overall, not in just some sectors. If the prices of transportation and food rise, then the prices of other goods and services must fall unless more money flows into the system. If we have no more to spend in toto, then when we must spend more money on gasoline, we have less money to spend on, say, clothing. This means that
clothing makers would have to lower their prices in order to sell their wares; they in turn would have less to spend on cloth, labor, and other inputs, so we should expect to see lower price levels in those sectors of the economy. The higher prices in one sector would be offset by lower prices in other sectors, as long as there is only so much money to go around."
