Yet as long as the inflation rate is stable and xpected, people can plan in advance or save money in banks for interest rates to avoid any undesired effects.
Though no conclusive evidence can be cited, it can be asserted that following categories of people are affected by inflation differently: Such analysis is useful to study the distributional and other effects of inflation as well as to recommend anti-inflationary policies. Causes of Demand-Pull Inflation: Prices of commodities are thereby increased.
It is said that rich becomes richer and poor becomes poorer during inflation. If the inflation rate is high and unanticipated, lots of problems can occur. If the consumption spending is countered by the government via price control and rationing device, the inflationary situation may be called a suppressed one.
In addition, adjustment with the new expected inflationary conditions may not be possible for all categories of people. Once the government curbs are lifted, the suppressed inflation becomes open inflation.
Finally, production setbacks may result in decreases in output. Sometimes, unionized worker succeeds in raising wage rates of white-collar workers as a compensation against price rise. Note that, in this region, price level begins to rise. Higher wage means higher cost of production.
This is true for all other commodities.
Cost of production may rise due to a rise in the cost of raw materials or increase in wages. But unfortunately the government has not met with success in getting rid of inflation. Thus, inflation is caused by the interplay of various factors.
But some people gain during inflation at the expense of others. It is clear that someone wins and someone loses from inflation. Duringthe German price level went up 5, per cent, inthe situation worsened; the German price level rose 1, times.
However, the redistributive burdens of inflation on income and wealth are most likely to be minimal if inflation is anticipated by the people. It is not high prices but rising prices that constitute inflation. If a rate of price rise is kept at this level, it is considered to be helpful for economic development.
Today it is Rs. In the past, some of the world economies e. Trade unions demand higher money wages as a compensation against inflationary price rise. Though no conclusive evidence can be cited, it can be asserted that following categories of people are affected by inflation differently: Thus public takes wrong way of not paying taxes and there will be escalation in prices.
Rather, the loan- giving institution makes adequate safeguard against the erosion of real value. So we have to import a huge amount of oil every year. Under the circumstance, business firms may be deterred in investing.
DPI can be explained in terms of the following figure Fig.
Its intensity or pace may be different at different times. This can be explained graphically. Government then experiences a shortfall in investible resources. If the supply of money in an economy exceeds the available goods and services, DPI appears.Inflation is defined as a continuous process of raising prices, or whatever it is, a continued decline in value of money.
Money loses value when the can not buy the same quantity of goods than before. Essays about a utopian society lomba menulis essay essay on literacy narrative introduction application essay heading why i want to be a radiology technician essays about love jud in a kestrel for a knave essay my reflection in the mirror essays ulc bangalore admissions essay importance of computer in our daily life essay san ge yue wang.
As inflation is a state of rising prices, deflation may be defined as a state of falling prices but not fall in prices. Deflation is, thus, the opposite of inflation, i.e., rise in the value or purchasing power of money.
Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy A chief measure of price inflation is the inflation rate.
As inflation is a state of rising prices, deflation may be defined as a state of falling prices but not fall in prices. Deflation is, thus, the opposite of inflation, i.e., rise in the value or purchasing power of money. Inflation Essay.
Inflation Introduction and Definition Inflation is a phenomenon which happens world wide. It causes many problems to countries all over the world.
Inflation is the rise in the general level of prices. When inflation occurs, each ringgit of income will buy fewer goods and services than before.
Essay on Inflation and Money.Download