Archive
What is Inflation
Definition:
Inflation can be defined as a sustained or continuous rise in the general price level or, alternatively, as a sustained or continuous fall in the value of money.
or
Inflation is an increase in the quantity of money and credit. Its chief consequence is soaring prices. Therefore inflation—if we misuse the term to mean the rising prices themselves—is caused solely by printing more money. For this the government’s monetary policies are entirely responsible.
or
Inflation is the increase in the supply of money and credit. ”A substantial rise of prices caused by an undue expansion in paper money or bank credit.”
The word “inflation” originally applied solely to the quantity of money. It meant that the volume of money was inflated, blown up, overextended.
Reason for inflation:
The most frequent reason for printing more money is the existence of an unbalanced budget. Unbalanced budgets are caused by extravagant expenditures which the government is unwilling or unable to pay for by raising corresponding tax revenues. The excessive expenditures are mainly the result of government efforts to redistribute wealth and income—in short, to force the productive to support the unproductive. This erodes the working incentives of both the productive and the unproductive.
