What is inflation, and how does it affect the life of society?

The answer to the question, what is inflation, is ambiguous. In general, this is an increase in the price level, but not necessarily all. Prices for some goods or services may increase, while others will remain virtually unchanged. That is, mean increase in prices. It is possible to designate in another way that such inflation is a general decrease in the value of money, which means that a much smaller quantity of necessary goods and services can be purchased for the same amount of money. Thus, there is an excessive accumulation of money supply, which exceeds the needs of commodity circulation.

What kind of inflation?

Inflation can be balanced (the prices of different goods do not vary with respect to each other) and unbalanced (some prices increase more, others less). The cause of inflation is found both in excessive demand (demand inflation is an excess of cash with limited supply of goods), and the supply (when prices rise because of rising costs of production). Thus, any disproportion between the supply and the available demand leads to inflation.
Depending on the growth rate, the following types of inflation are distinguished:

• Creeping (moderate) is limited to a growth rate of up to 10% per year. This is normal inflation, what this means for the economy, let us consider briefly. Slight growth in cash in the amount increases solvency, makes loans cheaper, stimulates production growth, modernizes its structure, activates investment activities. In turn, with the growth of production, the balance between the mass of money and the basket of goods is restored, but with a higher level of prices.
• Galloping inflation is a price increase of up to 50%. It poses a danger to the country's economy. In such a situation, the government of this country should take urgent anti-inflationary measures.
• Hyperinflation - the astronomical rate of price growth to 100% per month. It paralyzes the economy and leads to bartering. It is characteristic of a period of revolutionary transformation of the economic structure.
• Stagflation is inflation, accompanied by stagnation, a decline in production.

What influences the occurrence of inflation?

From the answer to the question, what is inflation, it follows that the slow growth of the total volume of goods for the money supply in the system leads to it. Again, the volume of money and the volume of goods have an "intermediary" - the speed of turnover of funds in the system. With its increase, the quantity of the commodity mass does not change, the money supply increases. Inflation can lead to:

• Monopolistic price determination, especially in the raw materials market;
• A shortage of labor, because of which wages can grow;
• Money issue of the state;
• Monopolization of trade unions, leading to a high level of remuneration.

How is inflation measured?

Depending on the purpose of research, the inflation rate is estimated in different ways. Measure indices: producer prices , living expenses, asset prices. Learn also the purchasing power of a country's currency and how its course is changing. The ratio of current expenditures for a certain assortment of goods to expenditures for the base period is determined using the Paasche index.

But the most common method of determining the level of inflation is the consumption price index, compared with the base period.

How does inflation affect the standard of living?

If the rise in the price level exceeds the increase in the nominal incomes of members of society, the real income of the population, which is determined by the goods and services purchased for these incomes, is reduced. Most of all in this case people with fixed incomes suffer: pensioners and civil servants.

Thus, we can give a different definition of what inflation is - the redistribution of income in society.