What are the effects and causes of inflation?
First, Let’s find out what inflation means!
The causes of inflation have always been a terrible confusion to me until I saw the video below! First the word itself seems to mean that something is inflated (filled in with air), but one never seems to find any article clarifying that. Let’s take the following article for example, from John Kevin, “Types of inflation”. In this article, we get the list of the different types of inflation, all very mechanical and theoretical, only adding to the frustration .
Well, let’s clarify this concept once and for all. To Inflate means “Fill (a balloon, tire, or other expandable structure) with air or gas so that it becomes distended.” So, in term of Economy, what is inflated? It is “the amount of currency in circulation”. When a country experience inflation, the amount of their “money supply” – the “paper (fiat) money” which has been printed by that country is what IS INFLATED! MORE is printed. MORE paper is flooded onto the society, so more people and companies can buy “stuff”. The result has always been a rise of the prices of good available in that society. In other words inflation describes a fall in the purchasing power of money. So in ordinary speech, inflation is often taken to mean high prices. How come, I let you see this video. Then you can read the following article and see that now it makes sense!
The title of this video is: The Money That Is Sold Abroad Is You!
Here is the article mentioned early:
“Types of Inflation
Author: John Kevin
Too much money chases too few goods. Inflation refers to the increase in the general price level of goods and services over a period of time in an economy. During inflation, not only the purchasing power of an economy decreases but also supply of money goes down. If inflation is within control then it’s beneficial for an economy however when it goes beyond the pre determined level, it can obliterate the whole economy. One of the major hindrances in the development of third world countries is Inflation.
There can be many Types of Inflation in an economy. Not every economy faces the same type of inflation. One of the major inflation types are discussed below
Types of Inflation
Demand-Pull inflation Demand pull inflation is one of the most important Types of Inflation. This type of inflation refers that the demand for goods and services in the economy is more than now it’s prevailing. It is obvious that when the demand surpasses supply prices of commodity will rise. The prices in this type of inflation will keep on rising until equilibrium is put in place between demand and supply.
Cost-Push Inflation Cost push inflation occurs when the cost of production of goods and services increases. Cost of production increases when the wages of employees increases. In the oil markets, this type of inflation can be promptly observed. When OPEC reduces oil supply, prices are artificially driven up and result in higher prices at the pump. This type of inflation is also known as supply shock Inflation.
Sectoral Inflation Sectoral inflation is also one of the important Types of Inflation. This type of inflation occurs when in a particular sector prices of good and services increases. It is obvious that when any particular sector is affected by inflation not only its employees but also its related [products and services] will also get affected.
Import Cost Push Inflation Import cost push inflation is another type of inflation. When a country is highly dependent upon imports and suddenly the import prices rise, import cost push inflation will occur. This type of inflation mainly occurs in the third world countries. This type of inflation was perceived highly by third world countries in 2008 when the oil prices increased. Import cost push created disturbance in the third world economies.
Hyper Inflation This is also one of the Types of Inflation however it is only perceived after war and it is transitory. Hyper inflation can even tumbles a country’s monetary system. This type of inflation obliterated Hungary’s economy in 1946 when the highest monthly inflation rate was 1.30 x 1016% which is 195% Equivalent daily inflation rate.
Article Source: http://www.articlesbase.com/finance-articles/types-of-inflation-4824294.html
About the Author
Hello I am john an undergraduate student. I like to write articles on different topics. If you want to read my latest articles or Submit free Articles, visit my web.”
This picture has been found on http://pakplace.blogspot.com/2010/09/inflation-or-rising-prices.html in an article posted by Muhammad Rashid.
We need Ron Paul as President
Luckily, Ron Paul has a good understanding of our economy and what inflation is. We need him to be elected, audit the Fed, as needed bring them to Justice, bring to Justice each and every other “politicians” who have been corrupted and got bribes for taking actions treasonous to America. We need a man of integrity who is going to bring pride back to our country and fix its issues. We need Ron Paul as President! He understands the causes of inflation, he will put our currency, the US dollar, back on a gold or silver standard and he will smooth the pain inflicted by the effects of inflation on our nation.