Inflation :- The Economic crisis
Hello , Dear friends welcome to creativity and info world. Friends , now a days we all are come across a major isssue , which is inflation in our country . Actually it is a major critical issue . Today we discuss here about following points:-
Lets begin ,
inflation in simple word is a general rise in the prices of most goods and services of daily or common uses such as food , clothing , housing, and recreation , transport etc. inflation measures the average price change in a basket of commodities and services over time
inflation affect the economy in both positive and negative way .
in negative way, it includes an increase in interest rates , uncertainity over future inflation , which may discourage investment and savings and if inflation were rapid enough, shortage of goods as consumer begins to store more than they needed out of concern that prices will increases in future. positive effect include reducing unemployment due to no changes in wages, allowing Central Bank a greater freedom in carrying out monetary policy encouraging loans and investment instead of not used by any payment.when the economic growth is good then there is more money in hands of people which can spend it on different item , when there is more money in hand of people they can spend it on different items ,that is the demand of everything would go up, in economy when demand goes up , the business and companies that manufacture this product seek to increase prices in bid to make more profit.
since so many people are willing to buy so the increases the prices of goods which will lead to implication . for example if the prices of wheat and rises rise due to bad to monsoon season , the prices of oil rises , or new tax imposed by government lead to rise in the prices of one of the raw material then the companies that manufacture that product using this raw material they would have to hike the prices of the product to make the profit since manufacturing them would become costlier. observing superficially you couldb think that this would be great ! as things would stop becoming costlier and that it is good for us .as we will be able to afford it for cheap. you would be able to save up more money and over time the value of money would not depreciate either. so this would another great thing! analysing deeply upon the reasons lead to inflation, it means your salary remain constant and since salary never go down therefore in general inflation always stays in the positive. if there is deflation,( I.e.) prices of goods keep decreasing every year .
then people would not want to spend more money , they would want to save them .first of all value of money is decreasing if deflation continued to happen, then after few years on the item that one wish to buy would come up would come for cheaper prices so they want to buy after few years instead of buy it now.
by this reason, the businesses would start incuring losses . Which leads to losing jobs , which ultimately leads to unemployment
.Hence deflation is also not good for us.the rate of deflation for our country is 4% (±2) which control inflation in our country.
In this way friends , we discuss about inflation. I hope this will clear your basic ideas about inflation.
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