One way of measuring inflation is the inflation rate ("The annual percentage rate of increase in the average price level") (Schiller p.138) This is measured by the consumer price index or (CPI) ("A measure index of change in the average price of consumer goods and services") (Schiller p.138) This is the average price of all consumer goods. The consumer price index measures people's day to day living expenses. Consumer price index's are also used to adjust payments for rents, wages, alimony, child support, and other obligations that might be effected by the changes in the cost of living. Some people believe inflation is bad but it usually means that the economy is growing. Deflation or little inflation could be a bad sign of an economy that is weakening. You can not really label inflation as a good or bad thing because it works both ways.
Deflation ("A decrease in the average level of prices of goods and services")(Schiller p.G2) With deflation your money is worth more as prices fall so in effect you become more wealthy when we have deflation. Output is increased because people can buy more and they have more purchasing power. Bonds will usually increase in value as prices fall. With deflation people spend more instead of saving more because they believe that their dollar is going further, which in turn will boost the economy and output by producers. People also lose with deflation and a falling price level. Creditors, homeowners, and property owners will tend to lose because the value of their assets goes down.
Stagflation is a term coined by economists in the 1970's to describe the previously unprecedented combination of slow economic growth and rising prices. (www.internation.se/toft/stagflation.htm) The 1970's were a bad time for stagflation the economy was bad yet prices continued to rise. Many blamed it on the 1973 Arab oil embargo, which cause a huge rise in the price of oil throughout the world.
"Inflation that is higher than expected benefits debtors. Inflation that is lower than expected benefits creditors."... Inflation was first noticed after the adoption of capitalism. ... The law of demand dictates this cause of inflation. ... While it is true that actual inflation normally does not stray far from anticipated inflation, an unanticipated inflation causes a loss to creditors that can"t be avoided. ...
Inflation is defined as a sustained rise in the general price level. When the inflation figures' come out once a month and are quoted on the news, the newsreaders give certain percentage rates of inflation'. ... This is much harder when inflation is high. High inflation tends to coincide with variable inflation and, therefore, very unstable prices. Unanticipated inflation causes uncertainty. ...
Inflation occurs when there is a sustained increase in the general level of prices. ... Inflation can cause a number of problems for an economy, so it can be said that there are costs of inflation. ... Inflation can cause a redistribution of wealth from savers to borrowers, because the real value of debts (the nominal value minus the inflation rate) is falling. ... Finally, inflation can cause problems if a country has higher inflation than overseas, as industry becomes less competitive and export markets suffer. ... This means that a rise in the money supply doesn't always cause infla...
What is inflation? ... Hence, inflation is not easy to define in practice. This should be kept in mind when discussing how to defeat inflation. ... Some say that inflation is not only expected, but also often, needed. ... There are even examples of inflation declining while the economy booms. ...
The answer is inflation. ... When this happens we may get demand-pull inflation or cost-push inflation. ... There are four other types of inflation that I will talk about and those are anticipated inflation, unanticipated inflation, stagflation, and hyperinflation. When we are expecting inflation to occur, we have anticipated inflation. ... The next type of inflation is unanticipated inflation. ...
Inflation can be divided into cost-push inflation and demand-pull inflation. Cost-push inflation is defined as "inflation whose initial cause is a rise in production costs". ... Inflation expectations can also cause inflation. ... Not every one suffers from the inflation. ... Today the market interest rates reflect inflation and inflation expectations. ...
Inflation is defined as "a period of rising prices when the purchasing power of the dollar is falling." ... To start the largest influence on why inflation occurs is the economic situation of a country. ...
Generally, a moderate rate of inflation has been the ultimate goal. ... So too does the belief that inflation originates in the labor market. ... Are there real long-term benefits to low, or zero, inflation? What are the real effects of low inflation? ... This implies that in the short-run, nominal wage rise will not fully absorb the actual inflation, and as such, there is scope for reducing unemployment through inflation. ...
Inflation Over the last century many countries throughout the world have experienced inflation as their major economic problem. Expensive wars have traditionally been recognized as the sources of inflation. ... World War II brought the persistent inflation that economists came to expect. ... There are two opposite theories regarding inflation. Monetarism indicates that inflation is due to increases in the supply of money. ...