6 things you should know 'bout inflation

By Josh Goldberg and Grey Tucker

Inflation is not always a bad thing.

Inflation of around 2-3 percent a year is actually a good thing for economic growth. Mild inflation for an economy can help growth but too much inflation can be a bad thing for the economy. Too much inflation can lead to depressions if the prices raise to much or if the economy doesn't grow

too much inflation can ruin a monetary system

this is called hyper inflation, when the price rises rapidly or out of control. this usually happens when there is a loss of confidence in a currency's ability to maintain its value. One big example of this price rise is Germany in 1923, when price rose 2500% in a month.

The economy can also deflate

deflation is the exact opposite of inflation, this is when prices decrease. Deflation can lead to an economic depression depending . Deflation usually has the side effect of unemployment. usually central banks attempt to prevent major deflation

There is a Stagflation too

stagflation is when the unemployment rate is high but the economic growth rate is low. this is usually accompanied by high inflation rates or by high prices. when the economy is not growing but prices are, stagflation happens.

Wages usually change during inflation

Wages tend to rise during inflation periods. The increase in the cost of general goods is because they have to pay for wages. This can have a negative effect on the overall cost on goods and services. this does not help employees because their wage has risen but so have the cost so they need more money for living. If wages go up too fast then unemployment happens

the way to measure Inflation is CPI

consumer price index measures the cost of certain items year to year. They see how the price of those specific items shows how the price of things overall has risen. Thi is not always trustworthy because it only measures the cost of certain goods

Comment Stream

2 years ago
0

Watch for typos, but great work!