6 Things you Should Know About Inflation
Satchel Manley, Hunter Smith
1.) There are multiple types of inflation:
Inflation, hyper inflation, and deflation are all types of inflation, they vary in different ways of what they do to the economy. Their affect can be good and bad. Also, depending on what type of inflation there is, it gives you an insight of what the countries economy is like at the time.
Inflation is when a general prices of goods increase and the value of the dollar decreases, this happens at a rate of about 1.5- 3% every year. inflation happens all over the world, including the united states.
Hyperinflation happens over a short period of tie but when it does, prices usually surge, this usually happens when the government makes bad decisions or during a war. The result? An increase in money in supply that is not supported by the economy.
Deflation being the opposite of inflation, tends to mean that there is a "bump" in the economy or that they are not doing well. This can be caused by a decrease in government, personal, or investment spending. Some examples of deflation are the 8 EU states in 2014 are experiencing some deflation.
5.) Inflation can be good:
In moderation, Inflation may devalue existing currencies but it puts more or extra money into the economy for investing, spending or saving, thus leading to a stimulated economy. With more money in the peoples hands they will spend it, causing a chain reaction of things that put money in peoples pocket.
6.) Causes of Inflation:
Demand pull inflation- If the economy is at or close to full employment then an increase in AD leads to an increase in the price level.
Cost Push Inflation- If there is an increase in the cost of firms, then firms will pass this on to consumers.