The consequences of inflation

Inflation can have an unpredictable pace.Under the conditions of a sudden, rapid growth of prices among market entities are benefited, while others are losing.

effects of inflation are manifested primarily in the redistribution of wealth and income.Lenders find themselves in a less favorable position than debtors.Recent richer at the expense of the former.For example, the payment of the loan for the construction of the house, according to the agreement, carried out at constant prices.This amendment to the treaties of this kind on the depreciation of money is not done.In this regard, during the period of instability to lend at a fixed rate is extremely disadvantageous.

effects of inflation are recognized on the balance sheet and prices.So, the market value of the goods is different from the prices of state-owned enterprises.In the regulated (public) sector, prices and cost of production of products (goods) are reviewed for longer and less frequently than prices in the private sector.With inflation s

tate enterprises are forced to justify every increase in the cost of goods and receiving permission to do so all the organizations standing up.It should be noted that, subject to a regular, abrupt, unexpected increase in the general price index, to carry out these actions technically extremely difficult.As a result of an imbalance developing public and private sector, the state thus loses the ability to influence the market.These effects of inflation are considered by experts the most dangerous.

In terms abrupt price increases hidden state begins to withdraw from public funds by means of taxes.This progressive taxation automatically enrolls often different types of business and social groups in the more affluent.Thus, the government is able to collect an increasing amount without the adoption of new rates and tax laws.In this regard, the attitude of the public and businesses to the government worsens.

effects of inflation are shown in rapid materialization of Finance.Corporations and individuals seek as soon as possible to invest their funds in depreciating tangible objects.Enterprises are beginning to develop plans to enhance the use of financial resources.By simply changing the relative scale of the cost of over-stimulated, too fast and not enough thought out flow of real economic resources.As a result, the overvoltage economic sector.In addition, inter-branch violated the proportionality.These economic effects of inflation clearly evident in Russia, when the panic started investing money in construction, the population began to buy furniture, gold.The enterprises started accumulation of "reserve" of productive resources in connection with the likely growth in the wholesale cost of materials.

With the growth of the overall price level decrease in the real monetary interest rate occurs on the value of the annual inflation rate.

unpredictable jumps reinforce the imbalance in the economy.Inflation helps disruption of economic relations, provoking a crisis of public finances.The social consequences of inflation reflected mainly in the reduction of real incomes of citizens, depreciation savings.At the same time the deterioration of the quality of life of representatives sotsgrupp with "solid" income (pensioners, students, employees and other citizens whose income is formed by the state budget).

believed that inflation - one of the most dangerous and painful phenomena today.In addition to the negative impact of the financial, economic sector, this process undermines the ability of regulation of economic activity, nullifying all efforts to implement the structural changes.