Exploring the Causes and Effects of Inflation Essay example

Exploring the Causes and Effects of Inflation Essay example

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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.

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