INFLATION

INFLATION

INFLATION:-Inflation is an increase in the level of prices of the goods and services that households buy. It is measured as the rate of change of those prices. Typically, prices rise over time, but prices can also fall (a situation called deflation).

The most well-known indicator of inflationary trend is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households.

In Australia, the CPI is calculated by the Australian Bureau of Statistics (ABS) and published once a quarter. To calculate the CPI, the ABS collects prices for thousands of items, which are grouped into 87 categories (or expenditure classes) and 11 groups. Every quarter, the ABS calculates the price changes of each item from the previous quarter and aggregates them to work out the inflation rate for the entire CPI basket.

In economics, inflationary trend is a general increase in prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.

What causes inflationary trend?

this is a measure of the rate of rising prices of goods and services in an economy. this can occur when prices rise due to increases in production costs, such as raw materials and wages. A surge in demand for products and services can cause inflationary trend as consumers are willing to pay more for the product.

Key Takeaways. this  is good when it combats the effects of deflation, which is often worse for an economy. When consumers expect prices to rise, they spend now, boosting economic growth. An important aspect of keeping a good inflationary trend rate is managing expectations of future inflationary trend.

inflationary trend erodes purchasing power or how much of something can be purchased with currency. Because inflationary trend erodes the value of cash, it encourages consumers to spend and stock up on items that are slower to lose value. It lowers the cost of borrowing and reduces unemployment.

What is causing inflation in the US?

Supply chain issues, surging demand, production costs, and swaths of relief funds all have a role to play, they say, but politics tend to cause one to point the finger at the supply chain or the $1.9 trillion American Rescue Plan Act of 2021 as the main culprits.

Who benefit from inflationary trend?

Inflation allows borrowers to pay lenders back with money worth less than when it was originally borrowed, which benefits borrowers.

Who is hurt by inflationary trend?

Lenders are hurt by unanticipated  because the money they get paid back has less purchasing power than the money they loaned out. Borrowers benefit from unanticipated inflation because the money they pay back is worth less than the money they borrowed.

Why do governments want inflationary trend?

Because of this, the government would get more tax revenue as wages and prices increase (e.g., if prices go up 10%, the government’s VAT receipts will increase 10%) Therefore, this helps government automatically get more tax revenue.

There are different types inflation which are explained below:

Creeping : This is also known as mild-inflation or moderate-inflation. This type of inflation occurs when the price level persistently rises over a period of time at a mild rate. When the rate of inflation is less than 10 per cent annually, or it is a single digit inflation rate, it is considered to be a moderate inflation.

Galloping : If mild inflationary trend is not checked and if it is uncontrollable, it may assume the character of galloping inflation. Inflation in the double- or triple-digit range of 20, 100 or 200 percent a year is called galloping inflation. Many Latin American countries such as Argentina, Brazil had inflation rates of 50 to 700 percent per year in the 1970s and 1980s.

Hyper: It is a stage of very high rate of inflationary trend. While economies seem to survive under galloping inflation, a third and deadly strain takes hold when the cancer of hyperinflation strikes. Nothing good can be said about a market economy in which prices are rising a million or even a trillion percent per year. Hyperinflation occurs when the prices go out of control and the monetary authorities are unable to impose any check on it. Germany had witnessed hyperinflation in 1920’s.

Stagflation: It is an economic situation in which inflationary trend and economic stagnation or recession occur simultaneously and remain unchecked for a period of time. Stagflation was witnessed by developed countries in 1970s, when world oil prices rose dramatically.

Deflation: Deflation is the reverse of inflation. It refers to a sustained decline in the price level of goods and services. It occurs when the annual inflation rate falls below zero percent (a negative inflation rate), resulting in an increase in the real value of money. Japan suffered from deflation for almost a decade in 1990s.

What is inflation right now 2022?

The Consumer Price Index increased 8.5 percent for the year ended March 2022, following a rise of 7.9 percent from February 2021 to February 2022.

What caused inflationary trend in 2022?

The COVID-19 pandemic is the primary factor driving excessive inflation through demand and supply-side distortions. Going forward, the economic distortions imposed by COVID-19 are highly likely to become less extreme in 2022, providing relief on inflation.

What sectors do well in inflationary trend?

The energy sector, which includes oil and gas companies, is one of them. Such firms beat inflation 71% of the time and delivered an annual real return of 9.0% per year on average. This is a fairly intuitive result. The revenues of energy stocks are naturally tied to energy prices, a key component of inflation indices.