The meaning and the role and the impact of inflation in the movement of the economy

The meaning and the role and the impact of inflation in the movement of the economy



6/10/2017 0:00

Adnan Kanani
word inflation means the presence of rising prices for goods and services / of food, books and treatment of clothes, cars and rental properties and other "and then the inflation reflects the continuing rise process in the general price level, or equivalent words: - continuous decline in the value of money, and reflects a statistically inflation that the increase in average prices over a specified period of time, Kalshhr year . Do not move all the prices in the same direction or the same ratio, and then the relative prices , " the proportion of commodity prices , some of them to some" change, for example , some commodities prices rise higher than goods other , and accordingly has to be affected by the distribution Spendable income resulting from the goods, and public spending is changing.
We understand the meaning of inflation that the temporary rise in the price of a commodity is not inflation, and the rising price of a commodity without being offset by a rise in the general level of prices is also inflation.

Inflation is not the whole evil is
seen a small amount of inflation - there is no limit agreed upon, but the proportion of less than two percent annually prepared by a few , many - that have positive effects on the economy, as seen as a pressure inherent risk, eroding the value of money, what gives an incentive for owners of savings to invest, rather than seeing it being eroded.
Another reason to consider positively to low inflation rates that negotiations on wages is not easy, and then be easy relative prices to adjust when there is a general increase in prices.
It also endeavors to achieve full price stability " , for example , by supporting some goods" can lead to reverse inflation "to any price reduction", which is seen as a result of negative conditioning in the movement of wages and production.
For the benefit, each activity generates income is production in the gross domestic product and accounts vary affected production to inflation when there is not stability in the adjustment costs with the prices and quantities of production.

When inflation is evil?
Inflation rates in excess of the cash required for the freedom of the border and investment incentives are negative, but their effects may be devastating, when rates of numbers closer to fiction.
Inflation is changing relative prices is also working on the payment of wages to rise, but it is noticeable that wages rise less often for higher prices, which means that wages actually have fallen.
If the decline in real wages high, it bode ill for most people because higher prices more than real wages means a lower standard of living.
For example , suppose that the income or salary "Q" of people has increased in five years , 20 percent, and assume that the rate of inflation during the same period was 24 percent, if the real income for "X" has four percent shortage.
Realtors earn as a result of inflation, as well as equity holders, a profit placebo sometimes , but financiers often do not win, if the benefits or returns that they receive less than inflation.
In short, inflation is working on the re - distribution of income, through its impact on the value of people 's wealth, and reduce entry reality by reducing the purchasing power of money.
But when you get an increase in the entry "nominal", the outcome will be as follows: when their incomes rise by more than the percentage rise in the index earning purchasing power higher, while those incomes do not rise by more than the percentage rise in the index, they either do not earn or lose " purchasing power does not change or go down. "

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