The Effects Of Inflation On The Economy

1572 Words7 Pages
This paper will discuss what exactly inflation is, what its effects on an economy are, and what the root causes of inflation are. Rampant inflation is very damaging to an economy and can have long lasting effects on the country and the World financial markets. Because of globalization the world is more interconnected than ever and in turn no economy is fully insulated from disruptions to the global markets. The difference between inflation and hyperinflation is also discussed. As the title states, inflations damaging effects on saving and the economy in general will be the primary focus of this paper. Also discussed is the damaging social impact of inflation on quality of life and political stability can be greatly affected by rampant inflation. How a government can grow their economy sustainably without the damaging effects of rampant inflation is focused on before the conclusion of this paper. Inflation is defined in Macroeconomics, logic, science, and policy, as "a sustained increase in the average level of prices of all goods and services". To put in simple words, it means a person has to continually pay more money to get the same amount of goods or services as they acquired before. Inflation is measured by long term comparing average prices using the Consumer Prices Index or the Retail Prices Index. Individual prices do not effect overall inflation, inflation is counted as an overall increase in price levels. Short term inflation is not measured because it could simply
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