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INFLATION

Inflation refers to a rise in prices that causes the purchasing power of a nation to fall. Inflation is a normal economic development as long as the annual percentage remains low; once the percentage rises over a pre-determined level, it is considered an inflation crisis. There are many causes for inflation, depending on a number camisetas de futbol oficiales of factors. For example, inflation can happen when governments print an excess of money to deal with a crisis. As a result, prices end up rising at an extremely high speed to keep up with the currency surplus. This is called the demand-pull, in which prices are forced upwards because of a high demand What is Inflation?

The measure of price increases within a set of goods and services over a period of time is known as inflation. The most common gauge of inflation is known as the CPI, or consumer price index, which measure the price increases (decreases) of basic consumer goods and services. The GDP deflator is another very important measure of inflation as it measures the price changes in goods that are produced domestically. In effect, inflation decreases the value of your money and makes it more expensive to buy goods and services.

Causes OF Inflation

There are a few different reasons that can account for the inflation in our goods and services; let's review a few of them.

• Demand-pull inflation refers to the idea that the economy actual demands more goods and services than available. This shortage of supply enables sellers to raise prices until an equilibrium is put in place between supply and demand.
• The cost-push theory , also known as "supply shock inflation", suggests that shortages or shocks to the available supply of a certain good or product will cause a ripple effect through the economy by raising camiseta panathinaikos prices through the supply chain from the producer to the consumer. You can readily see this in oil markets. When OPEC reduces oil supply, prices are artificially driven up and result in higher prices at the pump.
• Money supply plays a large role in inflationary pressure as well. Monetarist economists believe that if the Federal Reserve does not control the money supply adequately, it may actually grow at a rate faster than that of the potential output in the economy, or real GDP. The belief is that this will drive up prices and hence, inflation. Low interest rates correspond with a high levels of money supply and allow for more investment in big business and new ideas which eventually leads to unsustainable levels of inflation as cheap money is available. The credit crisis of 2007 is a very good example of this at work.
• Inflation can artificially be created through a circular increase in wage earners demands and then the subsequent increase in producer costs which will drive up the prices of their goods and services. This will then translate back into higher camiseta olympique marseille prices for the wage earners or consumers. As demands go higher from each side, inflation will continue to rise.

Effects?OF Inflation