The concept of inflation

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The concept of inflation

Solodkiy Y.

VLSU named after the Stoletovs

My paper is dedicated to one of the most important issues of the field of economics - i.e. inflation. The following points are touched upon in the paper:

1. There are several variations on inflation;

2. Two theories are generally accepted;

3. Different classifications of inflation;

4. Costs of Inflation;

5. The main causes of inflation include the following factors;

6. The negative effects of inflation include;

The paper and the Power Point Presentation may be used in teaching students of universities specializing in economics and management.

Text

During World War II, you could buy a loaf of bread for $0.15, a new car for less than $1,000 and an average house for around $5,000. In the twenty-first century, bread, cars, houses and just about everything else cost more. A lot more. Clearly, we've experienced a significant amount of inflation over the last 60 years.

Inflation is an overall increase in prices over a certain period of time. Inflation is generally defined as a persistent rise in the general price level with no corresponding rise in output, which leads to a corresponding fall in the purchasing power of money. Inflation varies considerably in its extent and severity.

There are several variations on inflation:

• Deflation is when the general level of prices is falling. This is the opposite of inflation.

• Hyperinflation is unusually rapid inflation. In extreme cases, this can lead to the breakdown of a nation's monetary system .One of the most notable examples of hyperinflation occurred in Germany in 1923, when prices rose 2,500% in one month.

• Stagflation is the combination of high unemployment and economic stagnation with inflation. This happened in industrialized countries during the 1970s, when a bad economy was combined with OPEC raising oil prices.

In recent years, most developed countries have attempted to sustain an inflation rate of 2-3%, but not everyone is able.

There is no one cause that's universally agreed upon, but at least two theories are generally accepted.

• Demand-Pull Inflation- This theory can be summarized as "too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase. This usually occurs in growing economies.

• Cost-Push Inflation - When companies' costs go up, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes, or increased costs of imports.

There are different classifications of inflation. The most common selection of three types of inflation:

• moderate (accompanied by a price increase of no more than 10% per year);

• galloping (from 20 to 200% per year);

• hyperinflation (>200% per year).

Galloping inflation, especially hyperinflation are invalid, because they lead to serious socio-economic consequences.

In addition to these kinds of inflation, there are open and repressed inflation.

Open inflation occurs in conditions where prices are not regulated from above and are formed under the influence of market factors. Regulator of prices is the ratio of supply and demand in major markets the goods market, money market, the labour market. Open inflation is characterized by a constant increase of prices. The reasons for their growth may be different.

Repressed inflation differs in that it occurs in conditions of strict regulation of prices and incomes. Repressed inflation is shown not to increase the cost and aggravation of commodity shortages.

inflation economic money repressed

Costs of Inflation

Almost everyone thinks inflation is evil, but it isn't necessarily so. Inflation affects different people in different ways. It also depends on whether inflation is anticipated or unanticipated . If the inflation rate corresponds to what the majority of people are expecting, then we can compensate and the cost isn't high. For example, banks can vary their interest rates and workers can negotiate contracts that include automatic wage hikes as the price level goes up.

The main causes of inflation include the following factors:

• the declines in gross domestic product (GDP) at constant volume of money in circulation;

• the growth of public expenditure at the expense of emission;

• excessive expansion of lending to companies and individuals;

• monopoly in the economy, when large firms are able to determine the cost of their products and costs.

Inflation, leaving the spin control has on the economic development of the whole complex of strictly negative, negative influences. It is recognized that inflation reduces the motivation to work, since it undermines the possibility of a normal implement price earnings. Inflation, especially in terms of price growth, increases social differentiation of the population, the gap between the "extreme" groups of income earners. The negative effect of inflation is that it limits the possibility of accumulation. Savings in liquid form is shrinking, partly accept natural form (purchase of property). The ratio between consumption and save part of the income shifted consumption. The issue of securities often does not reach the desired goal of "withdraw" money from the population. Inflation weakens the position of power structures. The desire of public authorities to obtain through the issuance of additional tools for solving the most urgent tasks creates a growing dissatisfaction, increased pressure from various social groups in order to increase wages, more benefits and subsidies. Decreases the credibility of the programs and activities planned and undertaken by the government. The population's response to the deteriorating conditions in the consumer market, in the production often takes a rather acute form: in 2000 817 enterprises striking 31 thousand employees, mainly for economic reasons.

The negative effects of inflation include:

• the decline in the real incomes of the population;

• impairment of savings;

• the gain imbalances between the production of industrial and agricultural products;

To maintain a fixed level of life is being introduced a system of compensatory measures, i.e. indexation of social programs, income of different groups of population, wages, pensions, stipends, allowances and other social payments to the population. However, the different countries practice of indexation of income, savings and compensation does not relieve the negative impact of inflation on the standard of living of the population, since these measures are usually held after the next price increase on the markets of goods and services.

Questions

1. What is the inflation?

2. What are the variations of inflation?

3. What are three types of inflation?

4. What factors are the main causes of inflation?

5. How does it affect your standard of living?

Bibliography

1. Агабекян И.П. Английский для менеджеров. Ростов-на-Дону, 2010.

2. Вороноцова И.И., Ильина А.К., Момджи Ю.В. Английский язык для студентов экономических вузов. Москва, 1999.

3. Любимцева С.Н. Английский язык для студентов финансово-экономических специальностей вузов. Москва, 2008.

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