More Examples
“I wanted to retire but a lifetime of inflation has wrecked my savings.”
“Inflation is not the cost of goods going up, but actually the value of money going down.”
“Extremely high inflation is sometimes called ‘hyperinflation.'”
Definition(s) from the Web
- Inflation is according to the classical definition “an increase in the money supply” That is “inflation or expansion of the stock of money”. In the 20th Century the most used definition was “an increase in the amount of money and credit relative to the amount of goods available” thus causing an increase in the price of goods. In the 21st century the meaning of inflation is most commonly used to describe an increase in consumer prices (caused by an increase in the money supply). Critics argue that this latest definition is confusing, especially for the needs of Bitcoin and Cryptocurrencies, since it is easy to measure money supply, whereas consumer prices can only at best be estimated. Mainstream economics does this through statistical indices such as the CPI which aggregate average prices of a basket of representative goods intended to be similar to the recurring expenses of average consumers. Changes in methodology, political influences and changes in consumer behavior however make such statistics increasingly problematic. A change in the composition of the basket used can yield very different CPI estimations. Source
- In economics, inflation (or less frequently, price inflation) is a general rise in the price level in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualised percentage change in a general price index, usually the consumer price index, over time.
Economists believe that very high rates of inflation, also known as hyperinflation, are harmful and are caused by an excessive growth of the money supply. Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.
Inflation affects economies in various positive and negative ways. The negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future. Positive effects include reducing unemployment due to nominal wage rigidity, allowing the central bank greater freedom in carrying out monetary policy, encouraging loans and investment instead of money hoarding, and avoiding the inefficiencies associated with deflation.
Today, most economists favour a low and steady rate of inflation. Source
