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What is inflation?

Concept of inflation
Concept of inflation
Inflation can be defined as the continuous increase in the general level of prices for a period of at least 6 months, which leads to a decrease in the real value of money.

Reasons inflation in the economy

  1. The general price level has risen for a long period that exceeds six months.
  2. Limited production elements: meaning that when there is a decrease in the number of workers or production factors that affect the production process such as raw materials, and then inflation appears as a result of the decrease in supply and the increase in demand.
  3. The state’s public budget deficit, which means that the state has more expenditures than revenues, a “budget deficit”, which leads to increased inflation due to external borrowing or increased printing of money.
  4. The emergence of a deficit in the capital of the production and operation process, which leads to the inflexibility of the production process.
  5. High operating costs in companies such as increasing salaries and others, which lead to inflation resulting from increased costs.
  6. An increase in the volume of money demand with the stability of the supply of goods and services, which leads to higher prices.
  7. Increasing prices in foreign markets with an urgent need for the state to import a commodity, causing imported inflation.

Types of inflation

  1. Creeping inflation.
  2. Negative inflation.
  3. Inflation tangent from demand.
  4. Creeping inflation.
  5. Stagflation.
  6. Inflation Hyperinflation.

Effects of inflation on the economy

  • An increase in the money supply in the country with the rise in prices, which leads to a price hike that significantly reduces the purchasing power of money. 
  • An imbalance in the redistribution of income within the country, like the poor, get poorer and the rich get richer. 
  • Savings in banks or outside the banking sector were exposed to a sharp decline in their value, as a result of the high rate of inflation in a way that exceeds the interest rate on deposits.

باحث اقتصادي هدفي إنشاء موسوعة عن الدول العربية توضح جوانب القوة في كل دولة، واتمني أن يأتي اليوم الذي يتحد فيه العرب لتعم الفائدة علي كل الشعوب.


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