Definition of inflation and its major causes

Inflation may be defined as a persistent rise in the general level of prices or alternatively as a fall in the value of money over a given period of time. Any increase in the quantity of money, however small, can be regarded as inflationary.
Inflation can also be regarded as a situation where the volume of purchasing power is persistently running ahead of the output of goods and services, so that there is a continuous tendency for prices (both of commodities and factors of production) to rise because the supply of goods and services and factors of
production fails to keep pace with demand for them (persistent/creeping inflation).
Inflation can also mean runaway or hyper-inflation or galloping inflation where a persistent inflation gets out of control and the value of money declines rapidly to a tiny fraction of its former value eventually to almost nothing, so that a new currency has to be adopted.
Because of its impact on the general economic performance, inflation is indeed one of the most unstable macro-economic variables that has drawn extensive concern in many economies, especially in the developing world.

(Visited 4 times, 1 visits today)
Share this:

Written by 

Leave a Reply