Inflation

Of the prices,to ensure increase to some extent as slowly and predictable,maybe these are the most important task of them who managing economy.But,the inflation has a bad tendency of getting uncontrolled.

               Inflation Levels Generally,inflation explained as a annual rate.So, 3% inflation rate, indicates that the prices in the economy are 3% higher than 12 months ago.

              Inflation, which is a fairly explanatory part of economic statistics,it gives knowledge about economy's health to us.If it very high,the economy may fall into inflation,so prices increase exponentially,also hyper-inflation can even happen.The difference between the two,it depends on the size of the price dimension.During the effect of Hyper-inflation in 1920s Germany and 21th century's first decade in Zimbabwe,at least 50% per month,most of the time was increasing more.While the gyper-inflation ceiled in 1923,in Weimar Germany there was printed banknotes from the value of 100 trillion marks.Even relatively low inflation rates of around 20% can be quite devastating.If the inflation come true,with a weak economy growth and recession at the same time,the situation may be quite bad.Stagflation is called when stagnant economic growth and high inflation are experienced at the same time.

              Causes and Results Inflation says to us about both social and economic status a something. We can understand how much the living expenditure of the country is compared with the increase of the income of the dwellings.If the inflation,getting increase more than families incomes,it means life standard is getting decreased:People can not buy as much as the old.But salaries,increase faster than inflation,when people spend,it means remain more than in their pockets,this indicating that the standard of living has increased.

               The salaries of employees are raised when the whole economy is growing rapidly,this mean spending more money on goods and services.Likewise, when the economy slows down, demand slows down, prices fall, or at least slower.

            The product prices doesn't only be affected from demand,also it does be affected the amount of money people have access to.When money supply increases,the same amount means that there will be a larger amount of money in the pursuit of the goods,this raises prices.

            Is there always inflation?  Whether the prices should always increase or not, the possibility of staying constant is also one of the frequently asked questions.In the past, prices have been seen to stop.In theory,inflastion doesn't necessary element for the economy to continueAlthough,during the last century,politicians has supported a little bit inflation at many kind of causes.

              Firstly,inflation,forces to people spending instead of saving; because the money in their pockets is losing value.This behavior is important for modern capitalist economies because in the long run companies encourage investing in new technologies.On the other hand,inflation erodes on debt.This one esspecially the debtor governments,to support inflation increasing,and like this way forces to devalue their debts.At the same time,generally inflation levels look like usury rates.People get used to positive(+) usury rates not negative(-) usury rates.In the past, there are a few examples in which the banks give debt to people and take money from of the people saving and to make debit them.In times of crisis,It is important to direct people to spend instead of saving.

             Finally,people are accustomed to increasing salary increases.It is the natura of human;they try to devolop themselves and at anytime don't take any salary rise-even though the prices at the stores were fixed at that time-,it is a difficult situation to accept.

           Inflation Spiral At the situation named as Prices Inflation Spiral may increase exponentially. As inflation increases,workers become unhappy because the standard of living falls.They want higher salary,if they succeed in raising their salaries,when they spend the extra money too, store owners will start to prices make higher.This situation make inflation increase,workers will want salary rising again.

          The problem in inflation and deflation,it is the ,can drag economies permanent instability.When people lost their trust to price ups and downs,it can stop savings and investments,so normal life can be interrupted.Therefore,governments and banks try to hold the price increases as in expected rates.If it succeed,as Ronald Reagan said ''The People expect an unpleasant experience.''

Different Inflation Measures

Consumer Price Index

Retail Price Index

Gross Domestic Product Deflator

Producer Prive Index

Other Indexes

Main Message

Allow the prices to increase slowly.