Choose your dream economy, and see how it compares to reality

You’ve probably noticed that prices have been rising. Economists and policymakers actually believe prices should increase a little bit, steadily and predictably. Specifically, they aim for an inflation rate of 2 percent each year.

Inflation especially stings now because of the spike over the last few years.

Even when inflation is where it’s supposed to be, a lot of factors contribute to it. Workers lobbying for better pay can push prices up — from there, employers might charge more to help cover their costs, and then other workers might also start asking to be paid more. Inflation can also arise from a mismatch in supply and demand: If 100 people want to buy cars, but a dealer only has 10 available, they will raise the price, knowing someone will probably want to pay it.

But you might only notice inflation when it’s higher than usual — and prices start to feel like they’re rising too fast. That’s what’s been happening lately. Inflation soared during the pandemic and worsened with Russia’s invasion of Ukraine. But the Federal Reserve has been working hard to try to bring prices back under control.

The central bank’s goal isn’t to push prices themselves down, but to keep them from rising too fast. Prices only tend to fall when the economy is in real trouble, and deflation usually brings along a slew of its own problems.

Wages tend to go up with inflation. Ideally, as goods and services become more expensive, your paycheck rises enough to keep up.

But average pay has bounced around over the past 30 years. Wages fell dramatically during the Great Recession, when the financial system cratered, millions of people lost their jobs and the recovery was slow.

After the pandemic, though, pay started to pick up faster than usual because employers were desperate to hire, and there weren’t enough people coming back into the labor market to take jobs at hotels, restaurants, retail stores, airports and more. Wages have cooled a bit since but are still above normal levels.

You can see gas prices changing all the time, with big billboards at every gas station nearby. Fuel costs also make up a large share of households’ budgets, so when prices at the pump rise, it can be especially tough.

Fuel prices swing around quite a bit, even in normal times. Gas costs often rise in the summer when there’s more consumer demand for travel and road trips. And they can be tied to global factors affecting oil supply and production.

Most recently, prices at the pump soared in the summer of 2022, breaking records at over $5 per gallon after Russia invaded Ukraine and roiled global energy markets. They’ve since come way down.

Even when the economy is doing well, a large share of the population doesn’t have more than a few hundred dollars stored away for an emergency cushion.

When the economy runs into trouble, people have an even harder time with emergencies: In 2013, in the wake of the Great Recession, only half of Americans could cover an unforeseen $400 expense. That share slowly grew as the economy continued to recover.

After the pandemic recession, an unprecedented level of government stimulus under the Trump and Biden administrations sent checks directly into peoples’ pockets and shored up unemployment benefits. That meant more people than usual could handle emergency expenses in 2021. Now that the extra support is drying up, the total is dropping again.

Your mortgage rate can make or break whether you can afford a house. For most home buyers, higher rates mean higher monthly payments, even for homes at the same price.

Mortgage rates are influenced by a range of factors in the housing market. They’re also tied to the Federal Reserve’s benchmark interest rate: When the Fed raises rates, mortgage rates go up and vice versa.

Rates that seem high today were fairly normal throughout the 1990s. But the Fed cut rates after the Great Recession and kept them low for years — and then did the same after the pandemic began. That means many millennials came of age when mortgage rates were historically low, at or below 4 percent. If you’re a generation older, though, you may remember paying nearly 20 percent for a mortgage in the early 1980s.

The stock market doesn’t always have much to do with the economy overall. But you still probably pay close attention to it, like many people: More than half of American households do have retirement accounts, and about one in five own stock directly.

The market drops during recessions or after sudden shocks, like the Sept. 11, 2001, terrorist attacks. Stocks also took a beating in 2008, when the collapse of the housing market triggered a global financial crisis. They dropped fast when the pandemic began, but then rallied again.

Generally speaking, the stock market trends up. And now, major indexes are clinching new highs.

Growth looks at the value of all of the goods and services — basically, all of the stuff — produced inside the United States, and gauges whether we’re making more of it than we used to.

This can bounce around depending on what else is happening in the country or the world. Gross domestic product tanked, for example, in the wake of the Great Recession in 2008, then again when the pandemic hit in 2020. But growth also surged after both of those slowdowns — especially after the covid recession, thanks to massive government stimulus spending. Things have calmed down to more sustainable levels, but the economy is still growing at a solid pace.