Exploring the Causes and Effects of Inflation Essay example

Exploring the Causes and Effects of Inflation Essay example

Length: 1565 words (4.5 double-spaced pages)

Rating: Powerful Essays

Open Document

Essay Preview

A balloon is flat and small when there is no air inside of it. When air is blown into

the balloon, it starts to grow in size and grow bigger and bigger until it reaches its limits.

Inflation in some ways is similar to the balloon. It will continue to grow and will not stop

until something is done to stop it. Inflation can cause great harm to an economy,

especially during a recession. What is inflation, what are some of the causes and effects

of inflation and what can be done to prevent it? These are just some of the questions that

surround this topic.

First off, what exactly is inflation? Inflation is simply an increase in the general

price level of goods and services. For example, if the inflation rate is 2% annually, then

theoretically a $1 pack of gum will cost $1.02 in a year.[1] So what inflation does is

basically lower the spending power of a currency and reduces the quantity of goods you

can purchase. There are also different types of inflation such as deflation, hyperinflation

and stagflation. Deflation is the opposite of inflation and it is the decline in the general

price level. The lowering of prices usually results in negative effects such as lowered

prices, decreased profits, increased unemployment, and failure to repay debts.

Hyperinflation is the extreme type of inflation. Usually when this happens, price

increases are happening at extremely fast and are out of control. Hyperinflation is a

situation where the price increases are so out of control that the concept of inflation is

meaningless.[2] There have been many cases of hyperinflation through history, some

being more prominent than others. For example, the most infamous case of hyperi...


... middle of paper ...


...lack market and pay higher prices. Though price ceilings can

help slow down the rate of inflation, it will not last forever. So these are just some of the

measures that can be taken to prevent inflation.


Inflation has mostly negative effects on an economy, especially present during a

recession. So to summarize it up, inflation is jus simply the increase in the general price

level. It effects the economy of almost every nation on the planet usually at a low rate

such as 1-2%. Inflation can be carefully prevent from going up too high which is good for

any economy. The questions: What is inflation, what are some of the causes and effects

of inflation and what can be done to prevent it? Are all questions that need to be

considered when dealing with inflation and when examined carefully can be very

Important to some governments.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Essay on The Effects Of Inflation On The Economy

- Causes of Inflation Inflation is defined as an increase in the expected price level and has been the signal for an improving economy, but it has also weakened an economy due to the unemployment it usually produces which usually hurts the Middle class the most. A healthy rate of inflation means an expanding economy due to higher tax revenues for the government and higher wages for businesses that are booming due to the high demand of their products. But if inflation surpasses of what is expected than employer will have to reduce wages to meet these new prices....   [tags: Inflation, Money supply, Economics, Money]

Powerful Essays
1416 words (4 pages)

Deflation, Inflation, And Inflation Essay examples

- What is inflation. Inflation is the widespread and sustained increase in prices of goods and services in a country. To measure inflation growth, we use indexes, which reflect the percentage growth of a weighted basket of goods. The index of measurement of the inflation is the Index of Prices to the Consumer (IPC). This index measures the percentage increase in prices of a basic basket of products and services that a consumer acquires in the country. What is deflation. Deflation is a general decline in the prices of an economy, which is the opposite of inflation....   [tags: Inflation, Money, Currency, Monetary policy]

Powerful Essays
2198 words (6.3 pages)

Essay about The Causes of Inflation

- The Causes of Inflation There are three major causes of inflation: 1. Demand - pull inflation 2. Cost - push inflation 3. Monetarist Theory 1. Demand - Pull Inflation ========================== This type of inflation is caused by excess aggregate demand, exceeding aggregate supply. Quite simply 'too much demand is chasing too few goods'. This can occur when the growth in aggregate demand is so strong, that aggregate supply cannot respond quickly enough - resulting in prices getting bidded-up....   [tags: Economics]

Powerful Essays
1112 words (3.2 pages)

The Effects Of Inflation And Its Effect On The Lives Of The People Essay

- nflation is an increase in the average level of prices .There are a lot of causes of inflation and it affects the lives of the people in a country. In the past decade ,Zimbabwe faced the most difficult challenges since 2000 the economy did not perform very and this led to hyperinflation .There are factors which led the rate of inflation to increase very rapidly in Zimbabwe at that time and some of them were low production capacity ,droughts ,sanctions imposed of the government by the developed states and poor economic policies .In the year 2000 ,the inflation was a 2 figure but in June 2008 it was more than 11 000 000 %....   [tags: Inflation, Economics, Money, Central bank]

Powerful Essays
729 words (2.1 pages)

Economic Theory : Types Of Inflation Essay

- After World War 2, deflation has been commonly defined as a sustained decrease of the price level (“price deflation”). There are two important elements of this definition which is the decrease of the level of prices (inflation rate < 0) and not individual prices. Either in a deflation or inflation, some prices will change more than others as relative prices change every day. The level could remain steady although relative prices change. Secondly the decrease must be sustained which means a continuing process over an extended period of time and without interruption....   [tags: Inflation, Monetary policy, Central bank]

Powerful Essays
1070 words (3.1 pages)

Grade Inflation And High Grades Essay

- “What is an ‘average’ grade?” This is the question that many ask. Grade inflation is the cause of many high grades yet many citizens would like to know what the causes of grade inflation are. There are those professors like Rebecca Schuman that admit to ‘giving’ high grades just to avoid the whining students. Schuman is not the only one there are many others that committ the same sin. However, there are also those who do not find a justification to grade inflation. Michael Zuckerman, Jason Saltoun-Ebin, Rebecca Schuman, Michael E.Gordon, Charles H....   [tags: Grade, Pattern grading, Education, Inflation]

Powerful Essays
1042 words (3 pages)

Inflation and the Economy Essays

- Inflation and the Economy WHY UNDER MONETARY FREEDOM INFLATION COULD BE STOPPED WITHOUT BRINGING ABOUT UNEMPLOYMENT 1. Unemployment and inflation do coexist and inflation causes much unemployment which would cease with it. 2. Excessively inflated prices would fall to market prices and so promote sales and employment. 3. Less government spending would mean more private spending. 4. Prices and wages could be adjusted fast. If this is not done then this is not the effect of stopping inflation....   [tags: Inflation Economy Economics Essays]

Powerful Essays
7770 words (22.2 pages)

Effects of Inflation Essay

- Effects of Inflation Inflation is the most commonly used economic term in the popular media. A Nexis search in 1996 found 872,000 news stories over the past twenty years that used the word inflation. "Unemployment" ran a distant second. Public concern about inflation generally heats up in step with inflation itself. Though economists do not always agree about when inflation starts to interfere with market signals, the public tends to express serious alarm once the inflation rate rises above 5 or 6 percent....   [tags: Economy Economics Money Essays]

Powerful Essays
2891 words (8.3 pages)

Inflation and Its Effects on Investment Essay

- Inflation and Its Effects on Investment For world economic markets, inflation is a fairly new experience as for much of the pre-twentieth century there had been little upward pressure on prices due to gold and other metallic standards. These backed currencies limited governments’ abilities to create new money. So at the end of the gold standard strong political pressures often caused governments to issue more money increasing the money supply and therefor the price level. Inflation reflects a situation where the demand for goods and services exceeds their supply in the economy(Hall, 1982)....   [tags: Finance Financial Economics Essays]

Powerful Essays
1361 words (3.9 pages)

Inflation Essays

- Inflation defines as an increase in the price you pay or a decline in the purchasing power of money. In other words, price inflation is when prices get higher or it takes more money to buy the same item. Interest rates are increased to moderate demand and inflation and they are reduced to stimulate demand. Monetary policy aims to influence the overall level of monetary demand in the economy so that it grows broadly in line with the economy's ability to produce goods and services. This stops output rising too quickly or slowly....   [tags: Economics Economy Price Inflation]

Free Essays
951 words (2.7 pages)