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