Inflation Definition Economics We all hear about inflation and is considered an economic phenomenon familiar, The statistics in this regard least once each quarter as we face this phenomenon in our daily lives, through higher prices, our mouth of perceived inflation as just a currency of their purchasing power loss without to delve deeper into the subject and beyond, and the question that arises in this context is what is resulting in inflation?
Inflation can be defined as a change in the consumer price ratio, and thus, this definition does not take into account the growth of real estate prices and stock, for example, and the reason for this is primarily due to the fluctuation of the latter prices as a result of the change-flop in demand on the one hand and the display on the other hand. And in fundamental demand and because it is in the case of prosperity, the wages grow by uneven, so that high wages grow faster low. For clarity, the demand for real estate and the stock be great when Buyers in these markets expect a rise in prices in the future, and these expectations are also present in a period of price stability. If we take for example the stock, the outlook in the long run either assume a rise in prices or a rise in the yield to the producers, and this The Brit Method Reviews be achieved only if the high productivity of the top producers of high wages.
Inflation is also a decrease in value of the currency, when increasing the amount of cash that people circulated faster than the increase in products that can acquisition the currency to lose value. The relationship between money supply and inflation, the size of a strong positive relationship.
The source of inflation is in high demand low supply quickly or to the same degree or in both, when the wage rate increase productivity or when growth exceeds rising cost of importing raw materials such as oil or money as head of production factors, the inflation index rising rapidly.
This phenomenon has great relevance if consumption and production on the one hand and monetary policy on the other. Inflation as we have seen lead to higher Does every rise in prices is an inflation?
The answer is no, because the concept of high prices so that they form inflation is a relative concept, What is The Brit Method height reached a certain level it becomes inflationary, that is, for example, rising prices at the local level faster than the global level, or when the rise will continue permanently, or when the growth of wages and salaries rising prices thus weakening purchasing power.
Inflation comes in three forms:
Inflation demand so high that a result of increased demand for the productive capacity of the economy. Increased spending in the economy here is not a real increase in production as much as a result of higher prices.
Inflation creeping and is an annual increase in the price level by over between -1% and 3%, and here it should be noted that the small rise in the price is the growth of the economy, and is due primarily to higher commodity prices before rising resource prices , the thing that lead to increased profits which stimulates producers to raise the level of their The Brit Method Software investments.
Inflation and upward
In prices Increasing pressure on prices reactions to exacerbate inflation, and thus it becomes a self-feeding. What I witnessed in Germany in the early twenties of this century what the government wants to cover its expenses by raising the cash where printed money at very high rates even hit rate
Fictional inflation rate led the Germans to resort to barter and use of goods instead of money.
The effects of inflation
See through this short overview for inflation and forms that of the biggest effects have the money for the most important functions, namely being a measure of the value and store it, the higher the
The Canuck Method Scam value of money, causing so in transactions between creditors and debtors disorder, and between sellers and buyers, and between producers and consumers chaos inside economy people opted to substitute for the local currency.
Inflation is also a social impact because it re-distribution of national income between the strata of society in a way unfair of it are mainly not gone fixed and limited wage earners who deteriorate their income fixed for being the most often and change happens very slowly and by less than the proportion of the general price level to rise. The savers financial assets Canuck Method Scam long-term banks are often a result of inflation to significant losses due to erosion in the real value, while savings are in land and real estate, precious metals benefit.
The effects of inflation on the economy, the deterioration of the value of the currency in the exchange market and the disruption of the balance of payments where the local industry is exposed to intense competition due to imported products, thus contributing to disable energies and an increase in unemployment and a decline in the standard of living. In this context it should be noted what happened in the United States of America, where shrinking surplus in its trade balance to where prices rose at a faster rate than in Japan and the countries of the European market productivity rate was at the highest
Level, and resulted in a deficit in the balance of known business processes.
The role of the Central Bank
From here we see that the central bank’s job is mainly concentrated in the achievement of price stability over the medium and long term without causing a recession cause of unemployment. His role here is to determine the adequate dose of the money supply to maintain economic growth with price stability. The Canuck Method Reviews noted that the central bank is pursuing a lane to perform this task. The first course is done by driving the monetary policy for the bloc, which is not much impact on prices in the short term, and so to see volatile trading during which the speed of cash. And the second is in the course of monetary policy dynamics of the benefits, and this approach affects quickly due to strong demand and its negative interdependence, Rising interest rates raise the cost of consumption, investment and public spending, and therefore, it contributes to the reduction in overall demand in the economy size.
Finally, and after a short presentation about inflation and the central bank’s role in the stability and thus the stability of the economy, it should be noted that in recent years has become a global free competition play a role in a simple and if price stability and thereby to reduce inflation.