Inflation And Its Effect On The Economy

Inflation is when there in an increase in price of goods and service, causing there to be a fall in the currency as lesser goods and services can be brought by each unit of currency due to the rise in price. Rapid economic growth will often lead to inflation. When the economy is rapidly growing, a company will need to employ more employees, resulting to a fall in unemployment rate. As unemployment rate falls, lesser people will be looking for jobs and the company will find it harder to fill up job vacancies. This will cause the salaries of the workers as well as company spending to increase, resulting in the company passing on the extra costs to the consumer. Together with the raise in salaries for the employees, they will have more to spend, resulting in an increase in an aggregate demand. All this will result in rapid economic growth, where the increase in price will cause inflation to occur.

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

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.

Inflation is the sustained increase in the general level of prices for goods and services in a county, and is measured as an annual percentage change. (Investopedia) During periods of inflation, the prices of products and services will rise. There are several reasons why an economy would see a rise in inflation. Decrease in supplies, corporate deciding to charge more, and consumer confidence are some of the reasons why an economy would see the inflation rate increase. Consumer confidence is when consumers gain more confidence in spending due to a low unemployment rate and wages being stable. Decrease in supplies is when consumers are willing to pay more for a product or service is that is slowly becoming unavailable due to a decrease in supplies. Corporate decisions are when the corporations basically decide

In this week's lesson we learn about the three primary concerns when analyzing macroeconomics inflation, unemployment and gross domestic product (GDP). When discussing inflation in the economy we understand that it is a major factor that it plays in today's economy. For example, when the price of a specific item or service is inflated the less your money will allow you to buy. Little inflation is good for the economy because this will allow companies to raise their employee's hourly wages. Too much inflation could be caused by the high demand for goods or service. Therefore, if the demand is high and the production is the same the price of the supply will increase. Consumers will continue to spend their money because they

Inflation is defined as a sustained increase in the general level of prices for goods and services. what does it mean to me well inflation is when the economy thinks that it is doing good but they make to much on one thing that people don't want to buy no more so they increase the price and that inflation happens.

Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well-known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy.

Inflation is defined as “the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.”[1]

Inflation is a sustained increase in the general price level, leading to a fall in the purchasing power of money. It is measured in two different ways, through the Retail Price Index (RPI) and the Consumer Price Index (CPI). The difference between the two is that the RPI takes into account different things compared to the CPI, such as housing costs.

Inflation is defined as a sustained increase in the general level of prices for goods and services. As inflation rises, every dollar someone owns, buys a smaller percentage of a good or service. There are two types of inflation: Demand-Pull Inflation and Cost-Push Inflation. Demand-Pull Inflation is if demand is growing faster than supply, prices then increase. Cost-Push Inflation is when companies’ costs go up, so increased costs include wages, taxes or increased costs of imports. From the data, I found the year with the highest inflation rate was 2008 with a rate of 3.85 %, the year with the lowest inflation rate was 2015 with a rate of 0.12%. In the year 2009, the inflation rate was negative (-0.34 %) meaning deflation happened ("Consumer Price Index Data from 1913 to 2016”). Deflation is when prices fall because the supply of goods is higher than the demand for those goods. In the year 2009, The Great Recession just happened and people were struggling with money and losing jobs. That explains

When the U.S. economy entered the Great Recession in 2007, I was entering the workforce for the first time and I had to battle for my spot in the workforce. As a middle class working citizen I felt the changes in the economy on the daily basis. Being a freshman in college, I had many new expenses that included a car payment, school loans, and a mortgage. This was a troubling time because my interest rate and hidden fees were outrages due to the instability of mortgage companies and the fragile state of the economy. During this period of time there were many families that were unable to

Inflation has been a problem for all of the world economies for many years causing a great deal of damage to stakeholders. Inflation is an increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service. As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 2%, then a soft drink that costs $1 in a given year will cost $1.02 the next year. As goods and services require more money to purchase, the implicit value of that money falls. (Investopedia)

It is referred to as the constant rate of change in the price level in the economy. Many economies encounter positive rates of inflation yearly (Sommers, 2005). Mostly, the price level is usually measured by a price index, which evaluates the price level of goods and services at a particular point in time. Again, the number of items contained within in a price index differs depending on the main objective of the index. Mostly, government agencies occasionally present three types of price indexes; each index has a definite uses and benefits. They include the consumer price index, producer price index and implicit GDP price deflector (Ball, 2012).

Inflation and Deflation, in economics, terms used to describe, respectively, a decline or an increase in the value of money, in relation to the goods and services it will buy. Inflation is the pervasive and sustained rise in the aggregate level of prices measured by an index of the cost of various goods and services. Repetitive price increases erode the purchasing power of money and other financial assets with fixed values, creating serious economic distortions and uncertainty. Inflation results when actual economic pressures and anticipation of future developments cause the demand for goods and services to exceed the supply available

In short, “a key feature of inflation is that it relates to the amount of demand in the economy. Inflation tends to rise when, at the current price level, demand for goods and services in the economy is greater than the economy's ability to produce goods and services - its output. One of the original descriptions of inflation remains valid - too much money chases too few goods.”(Bank of England What causes inflation)