Inflation And Its Effects On The Economy

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Global economy has been changing significantly in past several decades which has been affected by the goods and services in the national borders leading to the movement of the country up and down in the international system economically. The economy of the country is strictly hit by two important factors that are: deflation and inflation. Deflation can be defined as the decrease in the price of the goods or services provided. In the other hand, inflation can be defined as the increase in the price of the goods and services. It is observed that the deflation increases the power of purchasing and increase the value for the money whereas the inflation cause the decrease in the economic power. Inflation plays the vital role for the fluctuation of the economy in the country that directly affects the economy of the world. It actually affects the various macroeconomics and microeconomics factor of the economy leading to various consequences. The most important consequences is unemployment.
The phenomenon of inflation has been described in three different views: a) general view, b) Keynesian view and c) modern view. According to the general view it has been described as the increase in the price of goods and services but decrease in the value of the money. According to Keynes, it is the states when there is increase in the goods and prices as well as increase in the employment. The inflation is caused due to the increase in the expenditure that causing the shortage of the goods and
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