What does inflation mean in the economy?

yousef8 July 2022Last Update : 2 years ago
What does inflation mean in the economy?

The concept of economic inflation, according to the business dictionary, refers to the increasing and continuous rise in prices and the inability to control them by the government and the central bank. The absence of agreed reasons by economic experts for the occurrence of inflation in the economy, but in general inflation occurs as a result of increased printing of domestic money by the government, or it occurs as a result of rising wages, and thus a rise in prices in order to be able to cover high labor costs, according to Webster’s dictionary Inflation is the continuous rise in prices due to an increase in the amount of money available and credit for goods and services.

Causes of inflation

Inflation occurs as a result of several reasons, including the following: Consumer confidence: Consumer confidence increases and the possibility of them spending more money, coinciding with the decrease in unemployment rates and the stability of wages for the workforce, so that this confidence and this continuous spending of money leads to higher prices due to the increase in costs and fees that borne by the manufacturer and supplier of goods and services; due to the increased demand for it.

Shortage in supply:

Returning to the economic base in supply and demand, the greater the demand for a particular commodity, the less its supply in the markets, which leads to consumers spending a lot of money in order to obtain this commodity, especially if it is one of the indispensable commodities or services, and a shortage may occur in Display due to natural disasters, manufacturing errors or other matters.

Corporate decisions:

Sometimes inflation is brought about by certain companies with intent, especially those companies that manufacture a popular commodity that consumers need on a daily basis.

Inflation Effects

Here are some of the more common effects of economic inflation:

the erosion of purchasing power.
Higher borrowing costs.

price increase.
imbalance in international trade.
The effect of inflation on foreign exchange rates.

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