In this article we are going to learn what is inflation. What are its causes, species.
Inflation is a macroeconomic indicator of the country's economy, which characterizes the change in the general price level for goods, leading to the depreciation of money. The actual inflation in the country at the level of 10% means that you can buy 10% less goods for the ruble earned, that is, inflation is a decrease in the purchasing power of money. The word inflation is derived from Latin word “Inflatio”. The essence of inflation is that only paper money are exposed to it, it means overflowing the sphere of circulation with excessive mass of paper money as compared with the needs of commodity circulation, their depreciation and as a result price increases for goods and services, falling purchasing power of money.
So why does inflation appear?
Inflation can occur due to internal and external causes. Among these reasons are: violation of the proportions of reproduction: between production and consumption, accumulation and consumption, supply and demand, the money supply in circulation and the amount of commodity prices; a significant increase in the state budget deficit and public debt due to unproductive government spending; excessive emission of money that violates the laws of money circulation; the militarization of the economy, which diverts a significant part of resources to the defense industry, is a heavy burden for the state budget, increases its deficit and generates inflationary financing (deficit); increasing the tax burden on producers; anticipation of the growth rate of wages compared to the growth rates of labor productivity.
Also inflation is able to occur due to external reasons.
Mainly associated with the increased internationalization of economic relations between states, which are accompanied by increased competition in world capital markets, commodity markets, labor markets, aggravation of international monetary and credit relations, with structural global crises.
In a market economy, there are several types of inflation:
Moderate inflation - prices grow by 3-4% per year, which is considered normal rates;
Creeping inflation - prices are rising by 8-10% per year, which indicates an increase in destabilization phenomena in the economy;
Galloping inflation - the rise in prices is sharp, spasmodic and reaches 50% per year;
Hyperinflation - a rise in prices by 50-100% per year.