Inflation And It 's Determinants Essay

Firstly Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability. Inflation can either be negative or positive; it could mean making products more expensive. There are a number of effects of inflation that can

Economists for the most part trust that high rates of inflation and hyperinflation are caused by an over the top growth of the money supply. Perspectives on which factors decide

1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?).

| |Inflation: The increase in price for something as the demand grows and the product becomes less available due to the demand. If you have a new product that hits the market and is an |

According to the Federal Reserve Bank of San Francisco (2002), inflation can be defined as the increase in the level of prices and a decrease in the purchasing power of money. In short, money loses its value due to the increase of the prices of goods and services. Products that can experience this are food, clothing, electronics, raw materials, and more. The reasons for these occurrences are complex since there are two types of inflation, and each has its respective causes.

In the first place, inflation can be defined as a persistent increase in the overall level of prices charged for goods and services. It is constantly changing but it is only measured

commodities increases such as milk, gas and bread. It is a rise in all prices simultaneously. Inflation is caused when the demand for something exceeds the supply. This causes the price of that particular item to go up which in turn causes wages to go up and operating costs also increase (inflation).

Price elasticity of demand refers to the way prices change in relationship to the demand, or the way demand changes in relationship to pricing. Price elasticity can also reference the amount of money each

For example, a change in relative price brought about by the introduction of government subsidies and taxation.

Inflation is a bad thing because it means that the purchasing power of the consumer is weakened. Monetary policy can be used to curb inflation by using tools such as interest rates and the input and output of money.

Inflation happens in an economy when there is a rise of level of goods and services, due to an increase in the volume of money in an economy over a period of time. It is also referred to as an (erosion) in the value of an economy’s currency. When inflation is high, it affects the entire economy. Consumers are not able to afford the goods and services because of the high prices. Additionally, when the price level of goods and services increase, the value of currency reduces. Meaning, that each unit of currency buys fewer goods and services.

The difference between inflation and a rise in the price level, is that inflation, is an ongoing process of an increase in prices of products or services, whereas a rise in products’ prices is a one-time jump in price of the product.

According to B. R. Schiller, inflation is the general increase in the average level of prices of goods and services, and when the inflation rate is in excess of 200 percent lasting at least one year, that is hyperinflation. Because inflation is an increase in the average price of goods and services, it

Research about inflation is based on Inflation Theory. One of the famous inflation theory is the Quantity Theory that inflation can occur when there is increase the amount of money in circulation and the public's expectations of price increases in the future.

Inflation is commonly understood as a situation of substantial and rapid increase in the level of prices and consequent deterioration in the value of money over period of time. It refers to the advantage rise in the general level of prices and fall in the value of money. Inflation is upward movement in the average level of prices.