What is Inflation
According to many people, Inflation is a disorder of the economy. Inflation reduces the purchasing power of money. As a result, we have to spend more money to go to the market and buy the desired product. For example, you went to the market 1 year ago and saw the 15 dollars. This is the rise in commodity prices - this is what we call inflation in simple terms.
Inflation is a hot topic in many parts of the world. Generally speaking, to say inflation Refers to the increase in commodity prices. But temporary commodity prices raise cannot be called inflation. Then What exactly is inflation? In fact, inflation is the continuous rise in commodity prices over time. As the price of goods increases, we can buy less quantity of goods at the same price. The result is the purchasing power of money decreases.
Is inflation a bad actor in an Economy?
It is true that the prices of all goods and services, including daily necessities, go up due to inflation. However, if you think a little differently, you will understand that the inflation thing is not so bad.
When inflation occurs, the price of everything goes up and people fear that the price may go up further in the future. As a result, they want to buy more of what they need. For example, rumors of an increase in the price of sugar, everyone started buying more sugar! In other words, the market demand increases due to inflation. As demand increases, consumption increases and additional supply has to be arranged to meet the increased demand. As a result, new products are produced and new entrepreneurs are created. Through this system employment opportunities are created. In addition, as prices rise, investors are encouraged to make new investments so that they can make more profit. In other words, from the point of view of investors, inflation can be said to be quite beneficial!
However, inflation cannot be count as a good actor at all. The main reason for this is the increase in the price of goods. This results in inability to pay for goods or services.
The cause of inflation
Naturally now the question may come why inflation occurs? There are many reasons for this.
Increased money supply: The main reason for inflation is increase in money supply. When the money supply increases, the price level rises because the supply of money increases and the supply of goods increases It is not always possible to maintain equality in growth.
Government Expenditure: The government usually spends more than it earns. If the Government borrows from the public, it has little chance to inflation. But if Government borrowed from the central bank or foreign sources and spent it domestically then it has great chance to inflation.
More lending by commercial banks: If the country's money supply increases, the amount of savings of banks will increase and banks will be motivated to lend. If lending is easy, inflation can occur.
Inflation can be the cause of economic instability;
The transport fare for the distance ten years ago was 10 dollars, now it may be 20 dollars. In this way, the price of every product has gone up but no one's salary may have gone up that way. As a result, there will be a huge change in the meaning of his life. As a result, fixed income people suffer more than anyone else due to inflation.
In fact, inflation is neither a good nor a bad actor! A certain amount of inflation is needed to keep the country's economy afloat. However, if it becomes more or less the problem. Therefore, in order to keep inflation favorable, the central bank of each country has to sit through all the complex calculations.
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Informative piece thanks. It's usually the poor and average citizens that really feel the effect.
Thanks for your opinion...
I've got used to inflation since childhood. A few years ago we considered 7-8% annual inflation to be a small one. It was also the time of economic growth. These days our government changed the economic politics. No we have a small inflation and almost zero economic growth as government politics is too focused on stability.