Inflation

Inflation

Introduction

Inflation is a sustained decline in the value of the currency. This is a phenomenon persistent pushing up overall prices, which overlap and sect oral variations in prices. Currency (or money) is the standard of value, its variation is not directly measurable, and it is assessed from changes in prices to consumption of goods and services, measured in equal quantity and quality.

In France, inflation is measured by the index of consumer prices (CPI). This measure is determined by the INSEE and used by the French administration as an indicator of inflation (for the upgrading of the minimum wage in particular). In the European context (especially in the European System of Central Banks), the HICP (Index of Consumer Prices Harmonized) is used. This is a restatement of positions prices of national indices (CPI in France, Germany VPI, etc.) Identified by national statistics institutes (INSEE in France, Destatis, Germany, Italy ISTAT, etc.), established for the purpose of rendering indices comparable between member countries of the euro area. Reprocessing is essentially a slight modification of the weights of the different positions between HICP and national index, but also to the inclusion or exclusion of some items of consumption [e.g. in France the CPI considering the cost of disbursement of products health, while the HICP requires taking into account health expenditure, net of reimbursements] (Hudgins, 2010).

Discussion

Inflation is a phenomenon about which the controversy between economists are numerous: The debate on the consequences (which are sometimes regarded as positive) as the causes. Justified by the practical impact of this on the general population, these controversies are fueled by the questions posed on the steps taken to contain it and the degree of state intervention necessary to do so.

Causes of Inflation: Economy

There is often a rise in prices of goods and services. Sometimes there is an increase in sectoral, most often linked to the phenomenon of inflation, when there is a general rise in prices. What is inflation and what are the causes?

The currency depreciation

Inflation is the depreciation of the currency, which itself is immediately reflected by a general rise in prices and hence lowers purchasing power of people. Generally, this is a phenomenon that affects a significant issue in the money supply without being justified by wealth (reserve in gold or currency, expressed in aggregate economic growth, etc.). The most striking example of this is the case of the USSR. When the Russians were spending a lot of money to buy a single product.

Excessive demand over supply = inflation

Market mechanisms, namely supply and demand, should generally be a balance. However, when there is an imbalance between the two, it is immediately translated into inflation. Indeed, when there is a strong demand that is not absorbed or compensated by an equivalent supply, prices tend to rise and suddenly you are in an inflationary situation. Similarly, when prices of products offered are too high because of higher production costs, there will be what is called the second round effect of inflation or in imported inflation (when or more components of cost are imported).

The components of cost

In fact, several components of the cost may be affected by higher prices or wages, taxes, imports or a large change in exchange rates (referred to ...