What does inflation mean?
Inflation is a continuous rise in the general price level over a certain period of time.
When inflation occurs, it is often accompanied by higher prices and higher living costs.
So what causes inflation?
There are many reasons for the occurrence of inflation. The main reason is that the increase of floating money in the society exceeds the actual social demand for money, which leads to excess money, currency depreciation and price rise.
Of course, the causes of inflation are various, such as the increase of production cost and the decrease of supply capacity, which will also lead to inflation.
When inflation happens, if everyone's income does not increase, the poor with lower income often suffer welfare damage, the purchasing power of limited income decreases, the life pressure becomes bigger, the quality of life becomes worse. In contrast, rich people with more resources can benefit,
They can sell their goods and services to the poor at higher prices and make higher profits. At the same time, the rich tend to have bank debts, which they benefit from being able to pay off more cheaply when there is inflation.
Therefore, when there is a long period of high inflation, people are often poor and their lives are miserable.
If left unchecked, it can often lead to bigger crises, such as financial crises, corporate bankruptcies, accompanied by waves of unemployment.
The vicious circle can even endanger a country's security.
In 2022, Sri Lanka went bankrupt, and one of the important reasons was the combination of various factors, which led to the CPI of Sri Lanka rising as high as 39% in May 2022, triggering the bankruptcy crisis.
So is inflation only harmful?
In addition to the above harm, moderate inflation is good for economic development.
A country's economic development, it is necessary to invest funds, when these funds into the market, will inevitably lead to price rises.
Then moderate inflation is good for the economy, because it is small and long-term, and it is accompanied by rising incomes.
This is the development of many countries in the world. Twenty years ago, incomes were low and prices were low. As incomes are high, so are prices.
In the process, the economy grew in size, but without an inflation crisis.
Inflation is a continuous rise in the general price level over a certain period of time.
When inflation occurs, it is often accompanied by higher prices and higher living costs.
So what causes inflation?
There are many reasons for the occurrence of inflation. The main reason is that the increase of floating money in the society exceeds the actual social demand for money, which leads to excess money, currency depreciation and price rise.
Of course, the causes of inflation are various, such as the increase of production cost and the decrease of supply capacity, which will also lead to inflation.
When inflation happens, if everyone's income does not increase, the poor with lower income often suffer welfare damage, the purchasing power of limited income decreases, the life pressure becomes bigger, the quality of life becomes worse. In contrast, rich people with more resources can benefit,
They can sell their goods and services to the poor at higher prices and make higher profits. At the same time, the rich tend to have bank debts, which they benefit from being able to pay off more cheaply when there is inflation.
Therefore, when there is a long period of high inflation, people are often poor and their lives are miserable.
If left unchecked, it can often lead to bigger crises, such as financial crises, corporate bankruptcies, accompanied by waves of unemployment.
The vicious circle can even endanger a country's security.
In 2022, Sri Lanka went bankrupt, and one of the important reasons was the combination of various factors, which led to the CPI of Sri Lanka rising as high as 39% in May 2022, triggering the bankruptcy crisis.
So is inflation only harmful?
In addition to the above harm, moderate inflation is good for economic development.
A country's economic development, it is necessary to invest funds, when these funds into the market, will inevitably lead to price rises.
Then moderate inflation is good for the economy, because it is small and long-term, and it is accompanied by rising incomes.
This is the development of many countries in the world. Twenty years ago, incomes were low and prices were low. As incomes are high, so are prices.
In the process, the economy grew in size, but without an inflation crisis.
