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Causes of inflation and importance of controlling it
Inflation affects us, but in spite of that many of the people who are affected by this do not really know the definition of inflation, why does inflation occur and how can be controlled?
In the development of the essay it is intended to explain what is inflation?, How does it affect us?, Why does it present?, Why is it important to control it? And how measures are taken to control inflation.
Inflation refers to the variation of prices that occur in a certain country, that is, the increase in prices that have exaggerated in a country, inflation affects us too, since when the prices rise, prices are no longerThey could buy the same things that were bought before with that same salary, an example for this would be:
- Suppose we have $ 30.000 And with that money we buy two pairs of shoes and 3 shirts, having inflation with that same money we could no longer buy those same clothing.
To measure inflation growth, they use indices, which reflect the percentage growth of a weighted "family basket", inflation brings problems that weaken any economy.
Inflation can be presented due to demand and supply problems, there are three causes of inflation:
- INFLATION FOR CONSUMPTION DEMAND: If the demand for goods exceeds the production and import capacity, prices increase.
- Cost inflation: occurs when the price of raw materials increases, therefore the producer wants to maintain their profits and therefore increases prices.
- self-constructed inflation: It occurs when a strong increase in the future is thought and that is why they begin to adjust prices so that the increase is gradual.
- Inflation generated by inflation expectations (vicious circle): It is presented in high inflation countries, workers ask for salary increase to counteract the effects of inflation.
It is important to control inflation because:
- Economic resources are assigned in a better way.
- The acquired power of the people is presented.
- The authorities are easier to adopt economic policies.
And the most important thing about this is knowing what are the measures to control it:
Inflation is stopped because central banks tend to increase the interest rate of public debt, increasing rates in consumption loans, increasing this, the demand for products is slowed.
In conclusion this issue must know very well, since having inflation, it affects us and so know what we face, personally I did not know anything about the subject, but when investigating of this, I already have the knowledge of everything that theinflation can affect our pocket, especially that of our parents, but also as they stop.