Inflation Archives - Lessonnotes

10 Effects of Inflation

Written by Joshua April 28, 2023April 28, 2023

Inflation redistributes real income and wealth arbitrarily

When the inflation rate increases, the purchasing power of the currency decreases because the prices of goods and services will increase.

This means that people who have saved money or have liquid assets like cash will be negatively affected as the value of their assets will decline in real terms.

On the other hand, people who own tangible assets like real estate, stocks, or precious metals are less affected by inflation.

This is because the prices of these assets tend to rise with the inflation rate, or even faster than the inflation rate.

So, people who own such assets will actually see an increase in their wealth during inflationary periods.

Therefore, inflation redistributes real income and wealth arbitrarily, as it imposes a tax on those who hold money in cash or liquid assets while favouring those who hold real assets.

Economics

Monetary, Fiscal, and Direct Measures to Control Inflation

Written by Joshua April 18, 2023April 20, 2023

Fiscal measures of controlling inflation refer to the actions taken by a government to manage its spending and taxation policies, with the goal of controlling inflation.

In other words, fiscal measures mean the government controls inflation by changing its spending and taxation policies.

Economics

Types of Inflation

Written by Joshua April 11, 2023April 13, 2023

On the basis of rate, inflation can be categorized into five, namely: creeping inflation, walking inflation, galloping inflation, running inflation, and hyperinflation.

Economics

Causes of Inflation

Written by Joshua April 8, 2023April 10, 2023

Inflation occurs when money income and expenditure increase without a corresponding increase in the supply of goods and services.

In other words, inflation occurs when there is two much demand for goods and services in an economy, but the supply is not enough to meet the demand.

Economics

Inflation -Meaning, Characteristics, and Classification

Written by Joshua April 6, 2023April 11, 2023

Inflation means there is a persistent and sustained increase in the price level of an economy.

Simply put, it means that on average, the prices of goods and services in the economy are increasing.

There are two things to note about inflation.

First, a rise in the price of a single commodity in the economy does not constitute inflation but a rise in the average prices of goods and services constitutes inflation.

Secondly, the rises in the average prices of goods must be continuous for it to be called inflation.

Short-term spikes in prices do not qualify as inflation because they are not part of a long-term trend.

For example, a one-time increase in oil prices does not constitute inflation unless it leads to a sustained rise in the overall price level of goods and services throughout the economy.