Inflation is defined as a sustained rise in the general price level. When the inflation figures' come out once a month and are quoted on the news, the newsreaders give certain percentage rates of inflation'. Shoe-leather costs. This refers to the time wasted searching the market place for the lowest price. This is much harder when inflation is high. High inflation tends to coincide with variable inflation and, therefore, very unstable prices.
Unanticipated inflation causes uncertainty. The amount of money that firms invest in new machinery is likely to be lower in times of high inflation because it is difficult for the firms to be confident that the investment will be worthwhile. Lower investment means lower aggregate demand and a lower future productive potential.
Lower investment will lead to lower growth in GDP. Also, at times of high inflation, the Monetary Policy Committee are likely to raise interest rates in an effort to deflate the economy and reduce the inflation rate. Higher interest rates will result in firms investing less, consumers spending less and the value of the £ rising, which is bad for exporters.
Cost push inflation is associated with rises in the costs of an industry, or the economy generally. The main reasons why costs might rise are increases in wages and salaries (the biggest cost of production economy wide); increases in the cost of raw materials; increases in the price of imported goods (either as finished goods, semi-finished manufactures or raw materials) due to a fall in the value of the £ or price rises in the country of origin; increases in indirect taxes (or reductions in government subsidies).
"Inflation that is higher than expected benefits debtors. Inflation that is lower than expected benefits creditors."... Inflation was first noticed after the adoption of capitalism. ... The law of demand dictates this cause of inflation. ... While it is true that actual inflation normally does not stray far from anticipated inflation, an unanticipated inflation causes a loss to creditors that can"t be avoided. ...
These are inflation, deflation, hyperinflation and stagflation. Inflation can be a good thing or a bad thing, in a good economy with low employment it is good to have inflation, but when there is bad unemployment inflation is a bad thing because people do not have or earn enough money to keep up with changing prices. ... When there is inflation the value of a dollar never stays constant. ... Inflation in effect wipes out your purchasing power. ... Stagflation ("The Simultaneous occurrence of substantial unemployment and inflation")(Schiller p.327) In theory inflation and unemployment move in o...
Inflation occurs when there is a sustained increase in the general level of prices. ... Inflation can cause a number of problems for an economy, so it can be said that there are costs of inflation. ... Inflation can cause a redistribution of wealth from savers to borrowers, because the real value of debts (the nominal value minus the inflation rate) is falling. ... Finally, inflation can cause problems if a country has higher inflation than overseas, as industry becomes less competitive and export markets suffer. ... This means that a rise in the money supply doesn't always cause infla...
What is inflation? ... Hence, inflation is not easy to define in practice. This should be kept in mind when discussing how to defeat inflation. ... Some say that inflation is not only expected, but also often, needed. ... There are even examples of inflation declining while the economy booms. ...
The answer is inflation. ... When this happens we may get demand-pull inflation or cost-push inflation. ... There are four other types of inflation that I will talk about and those are anticipated inflation, unanticipated inflation, stagflation, and hyperinflation. When we are expecting inflation to occur, we have anticipated inflation. ... The next type of inflation is unanticipated inflation. ...
Inflation can be divided into cost-push inflation and demand-pull inflation. Cost-push inflation is defined as "inflation whose initial cause is a rise in production costs". ... Inflation expectations can also cause inflation. ... Not every one suffers from the inflation. ... Today the market interest rates reflect inflation and inflation expectations. ...
Generally, a moderate rate of inflation has been the ultimate goal. ... So too does the belief that inflation originates in the labor market. ... Are there real long-term benefits to low, or zero, inflation? What are the real effects of low inflation? ... This implies that in the short-run, nominal wage rise will not fully absorb the actual inflation, and as such, there is scope for reducing unemployment through inflation. ...
Inflation Over the last century many countries throughout the world have experienced inflation as their major economic problem. Expensive wars have traditionally been recognized as the sources of inflation. ... World War II brought the persistent inflation that economists came to expect. ... There are two opposite theories regarding inflation. Monetarism indicates that inflation is due to increases in the supply of money. ...
