Inflation and investment essay

Rise in prices is called inflation. Inflation at very fast rate is Hyper-Inflation, medium is Strato-Inflation and low lever is Creeping inflation. During the recent years the rise has abnormal and it has endangered the stability of our economy nationally and individually.

Inflation and investment essay

Essay on the Meaning of Inflation: Inflation and unemployment are the two most talked-about words in the contemporary society.

These two are the big problems that plague all the economies. Almost everyone is sure that he knows what inflation exactly is, but it remains a source of great deal of confusion because it is difficult to define it unambiguously.

Inflation is often defined in terms of its supposed causes. Inflation exists when money supply exceeds available goods and services.

Essay on Investment

Or inflation is attributed to budget deficit financing. A deficit budget may be financed by additional money creation. But the situation of monetary expansion or budget deficit may not cause price level to rise.

In other words, inflation is a state of rising price level, but not rise in the price level. It is not high prices but rising prices that constitute inflation. It is an increase in the overall price level. A small rise in prices or a sudden rise in prices is not inflation since these may reflect the short term workings of the market.

It is to be pointed out here that inflation is a state of disequilibrium when there occurs a sustained rise in price level. It is inflation if the prices of most goods go up.

Inflation and investment essay

However, it is difficult to detect whether there is an upward trend in prices and whether this trend is sustained. That is why inflation is difficult to define in an unambiguous sense.

Essay on Investment

Suppose, in Decemberthe consumer price index was Thus the inflation rate during the last one year was As inflation is a state of rising prices, deflation may be defined as a state of falling prices but not fall in prices.

Deflation is, thus, the opposite of inflation, i. Disinflation is a slowing down of the rate of inflation. Essay on the Types of Inflation: As the nature of inflation is not uniform in an economy for all the time, it is wise to distinguish between different types of inflation.

Such analysis is useful to study the distributional and other effects of inflation as well as to recommend anti-inflationary policies.

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Inflation may be caused by a variety of factors. Its intensity or pace may be different at different times. It may also be classified in accordance with the reactions of the government toward inflation. Thus, one may observe different types of inflation in the contemporary society: This type of inflation is caused by the printing of currency notes.

Being profit-making institutions, commercial banks sanction more loans and advances to the public than what the economy needs. Such credit expansion leads to a rise in price level.

The budget of the government reflects a deficit when expenditure exceeds revenue. To meet this gap, the government may ask the central bank to print additional money.Economic essays on inflation.

UK inflation since Definition Costs of Inflation – Inflation causes decline in value of savings, uncertainty, confusion and can lead to lower investment. Measuring Inflation – Inflation is measured by CPI and RPI. It is calculated by finding a typical basket of goods.

Economic theory tells us that inflation, especially unexpected, leads to uncertainty about future prices, which affects decisions on spending, saving and investment, resulting in poor allocation of resources and thus hindering the growth economic.

Inflation and Its Effects on Investment For world economic markets, inflation is a fairly new experience as for much of the pre-twentieth century there had been little upward pressure on prices due to gold and other metallic standards. Inflation and Its Effects on Investment For world economic markets, inflation is a fairly new experience as for much of the pre-twentieth century there had been little upward pressure on prices due to gold and other metallic standards.

Inflation due to the rise in food and oil prices has caused disastrous results in the world, especially in poor countries.

Oil is often demanded but there is little supply. So this is a type of demand-pull inflation. Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.

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