WHAT IS INFLATION?

Define Inflation?

Inflation is defined as a measure or rate at which the costs of goods and services rises.

What is Inflation in more detail?

Inflation is a topic which our global economists now is greatly concerned. It is which the goods and services costs are rising and the purchasing power decline. The consumers are prompting to spend less on goods and services because the monetary value decreases as price increases.

Inflation affects the economy of a country. It does not only affects the government but also to the consumers day to day life. Some may think that inflation is good for a thriving economy but the rates raise concerns. A consumer will have to think to buy goods and services that only he needs and not what he wants.

The purchasing power of a unit of currency declines as a result of inflation. For example, if the inflation rate is 2% , then a chocolate bar that costs $3 in a given year will costs $3.06 the next year.

We don’t sometimes realize that the effects of inflation are huge. Gas prices rise, food prices go up, transportation prices increases and the uncontrollable skyrocketing of other goods and services over time. Most importantly it can affect our long term savings and retirement funds.

Right now this is a huge debate if the inflation rate continue to rise but it doesn’t match the rise of people’s income. If income will not increase together with the prices of goods and services then expected that everyone's purchasing power will be effectively reduced.

When you mention inflation to someone it will creep him up because like weight gain which certainly we don’t like, the effects of inflation to us are gradual and profound. So what causes inflation you might ask. Causes of inflation are money supply, national debt, demand-pull effect, cost-push effect and exchange rates.

Some good aspects of inflation we can take is that if inflation rate is healthy it is considered positive because it does results to increase of wages and corporate profits and it will keeps the capital flowing in a growing economy.

 

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