Dictionary of 2023 Inflation !
Nowadays all the news are all about the economy. However do we really understand what the news are about? Here we will talk about one of this new everyday worlds "inflation".
What is inflation?
The term inflation appeared in America in the mid-nineteenth century, "not in reference to something that happens to prices, but as something that happens to a paper currency".
• In economics, inflation is a general increase in the prices of goods and services in an economy.
• When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services.
• The common measure of inflation is the inflation rate, the annualized percentage change in a general price index. As prices do not all increase at the same rate, the consumer price index (CPI) is often used for this purpose. The employment cost index is also used for wages in the United States.
What is inflation rate
• Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
How to measure inflation
• First, subtract the CPI from the beginning date (A) from the later date (B), and divide it by the CPI for the beginning date (A). Then multiply the result by 100 to get the inflation rate percentage
Types of inflation
• Demand-pull Inflation: It occurs when the demand for goods or services is higher when compared to the production capacity. The difference between demand and supply result in price appreciation.
• Cost-push Inflation: It occurs when the cost of production increases. Increase in prices of the inputs increases the price of the product.
• Built-in Inflation: Expectation of future inflations results in Built-in Inflation. A rise in prices results in higher wages to afford the increased cost of living. So, high wages result in increased cost of production, which in turn has an impact on product pricing.
I hope you found interesting this article .
P. S a Great quote from one of the brightest minds.
“The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge.” -Stephen Hawking.
