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What is inflation?

In Economy, Inflation on May 9, 2008 by viCheth

I have been posting news related with the inflation, but some people don’t really know what exactly the inflation is. Is it about the price of goods go up? Yes it is a part of the inflation. but let’s see what else causes the inflation.

wikipedia.com

Inflation is a rise in the general level of prices over time. It may also refer to a rise in the prices of a specific set of goods or services. In either case, it is measured as the percentage rate of change of a price index.[1]

Mainstream economists believe that high rates of inflation are caused by high rates of growth of the money supply.[2] Views on the factors that determine moderate rates of inflation are more varied: changes in inflation are sometimes attributed to fluctuations in real demand for goods and services or in available supplies (i.e. changes in scarcity), and sometimes to changes in the supply or demand for money. In the mid-twentieth century, two camps disagreed strongly on the main causes of inflation at moderate rates: the “monetarists” argued that money supply dominated all other factors in determining inflation, while “Keynesians” argued that real demand was often more important than changes in the money supply.

There are many measures of inflation. For example, different price indices can be used to measure changes in prices that affect different people. Two widely known indices for which inflation rates are reported in many countries are the Consumer Price Index (CPI), which measures consumer prices, and the GDP deflator, which measures price variations associated with domestic production of goods and services.

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