What Is Inflation? Inflation is when the prices of most goods and services continue
to creep upward. When this happens, your standard of living falls.
That's because each dollar buys less, so you have to spend more to get
the same goods and services. If inflation is mild, it can actually spur further economic growth. If
prices rise slowly and gradually, it can encourage people to buy now and
avoid future price increases. This increases demand, driving further
economic growth.The rate at which the general level of prices for goods and services is
rising, and, subsequently, purchasing power is falling. Central banks
attempt to stop severe inflation, along with severe deflation, in an
attempt to keep the excessive growth of prices to a minimum.
Types of Inflation_
It's important to understand the difference between the many different
types of inflation. If inflation is more than 50% a month, that's known as
hyperinflation. This hasn't happened in the U.S. since the Civil War, but occurred in Germany before World War II, and in Zimbabwe in the 2000s.
Stagflation is when inflation occurs despite slow economic growth. The last time this happened in the U.S. was in the 1970.
How Does Inflation Impact On Life? Inflation
usually hurts ones buying power. That's because rising prices means one
have to pay more for the same goods and services. Inflation can help one if you are the lucky recipient of income inflation. one can also
benefit from asset inflation, such as in housing or stock ,
if ones own that asset before the price rises. However, if ones income
increases at a slower rate than general inflation, ones buying power
declines even if one is making more. Furthermore, many people can get
hurt by an asset bubble
if they try to time it, and buy right when the bubble is about to
burst. In general, inflation's main consequence is a subtle reduction in ones standard of living.
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