answer to the question of what inflation is ambiguous.In general, this increase in the price level, but not necessarily all.Prices for some goods or service may be increased, while others remain virtually unchanged.That has meant an average increase in prices.You can designate a different way, that is inflation - a general reduction in the cost of money, which means, on the same amount of money you can buy a much smaller number of necessary goods and services.Thus, there is an excessive accumulation of money that exceeds the needs of trade.
What is inflation?
Inflation can be balanced (the prices of various goods does not change relative to each other) and unbalanced (some prices go up more than others).The cause of inflation is in excess demand (demand inflation - is the excess of cash with a limited supply of goods) and sentence (when prices are rising because of rising production costs).Thus, any imbalance between supply and demand available leads to inflation.
Depending on the growth rate of the following types of inflation:
- Creeping (moderate) is limited to the figure rising to 10% a year.This is a normal inflation, what does this mean for the economy, let us consider briefly.A slight increase in the amount of money increases solvency, making credit cheaper, stimulates the growth of production, modernize its structure, increase in investment activity.In turn, the growth of production restores the balance between the weight of a basket of goods and money, but with a higher price level.
- Galloping inflation - a rise in prices up to 50%.Dangerous for the country's economy.In such a situation, the government of the country must take urgent anti-inflation measures.
- Hyperinflation - an astronomical rate of price increases of up to 100% per month.It paralyzes the economy and leads to barter.Peculiar to the period of the revolutionary transformation of the economic structure.
- Stagflation - inflation is accompanied by stagnation, decline in production.
What affects the appearance of inflation?
From the answer to the question, what is the inflation rate, shows that it results in a slow increase in the overall volume of goods available in the system for the money supply.Again, the amount of money and the volume of goods have a "mediator" - turnover rate of funds in the system.With its increasing number of commodity weight does not change, the money supply increases.Can lead to inflation:
- definition of monopoly prices, especially in the market of raw materials;
- labor shortages, due to which wages can grow;
- monetary emission state;
- monopolization of trade unions, leading to a high level of pay.
as measured by inflation?
Depending on the purpose of research assessment of the level of inflation produces a variety of ways.Measure codes: producer prices, living expenses, asset prices.Learn also the purchasing power of the country's currency and how it is changing course.The ratio of current expenditure to a certain range of goods to the costs for the base period is determined by the Paasche index.
But the most common method for determining the rate of inflation - the price index of consumption, compared with the base period.
how inflation affects the standard of living?
If the rise in the price level higher than the increase in nominal incomes of the members of society, then reduced the real income of the population, which is determined by the revenue acquired for goods and services.Most of all, in this case affects people with fixed incomes: pensioners and civil servants.
Thus, it is possible to give a different definition of what inflation - is the redistribution of income in society.
