Have you heard about inflation? Maybe we’ve heard from television or reading news about inflation but don’t really understand about it. Am I right? So, I’ll share the basic information about inflation.
What is Inflation
From investopedia definition, inflation means the rate at which the general level of prices for goods and services is rising and subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.
Maybe after read about the inflation definition we can get some picture about it. To make it clear, we need to know effects of inflation on the economy. Let’s read this
What Are The Effects of Inflation
The big effect of inflation is about buying power. If in 2000 you can buy 10 item with $100, in 2010 you only can buy 5 item with $100.
The major effect of inflation is that a nation’s nominal currency loses value as I’ve explain above. Other than that’s there’s other major effects of inflation such as :-
- Savers and investors lose purchasing power. The money they save becoming less valuable with the passage of time.
- There’s positive effect for debtors as they can pay their debts with money that is less valuable.
- Another major effect of inflation is the damage it can do to the average workers. Wages and salaries can lag cost of living increases, making families struggle to keep up as the price increases faster.
That’s some basic information about inflation. If you have any additional idea you can comment at the box below..