Why there is an inflation

Why there is an inflation

Inflation represents the process of the general level of price increase and decrease in purchasing power of money conducting to redistribution of the national income. In modern economy inflation is generated by a number of factors.

The sponsor of placement P&G Articles on the subject "Why There Is an Inflation" How to prove price increase That such inflation How to determine elasticity of demand by the price First, because of incorrect monetary policy of the central bank in the address appears the excess mass of money which is not provided with goods. If the state seeks to push production, resorting to economically unreasonable monetary issue, a high probability that excess weight will discompose the monetary market. Instead of preserving economy against inflation, the Central bank, on the contrary, will accelerate development of inflationary process.

One more reason of inflation – budget deficit. In this case its rates depend on the organization of a covering of budget deficit. Where the budget deficit is covered at the expense of increase monetary weight, inflation arises inevitably. Also the covering of budget deficit at the expense of short-term loans of the government the central bank can be the cause of inflation. Let's say the government borrowed some sum at bank and undertook to return it with percent in a year. A year later it extinguished the taken loan and obtained the new credit, but such situation repeats from year to year. So there is a credit issue causing swelling of money supply and giving an inflation impetus.

These reasons of inflation belong to the monetary. As the similar reasons of inflation are considered also excessive investment when the volume of investment exceeds economy volumes, the advancing growth of a salary in comparison with increase in production and labor productivity.

Refer the deformation of economic structure which is followed by lag in development of branches of a consumer demand, decrease in efficiency of capital investments and control of growth of consumption, imperfection of a control system of economy to the structural reasons of inflation.

One more reason of inflation – a high level of monopolization of economy. As the monopoly has an absolute power in the market, she is able to influence the prices, so, monopolization promotes development of the inflation which began owing to other reasons.