Inflation: the concept, the level of inflation, its types

Inflation is a situation where the channels of money circulation are overfilled with excess money. This is manifested in an increase in commodity prices.

As an economic phenomenon, inflation actually appeared in the 20th century, although earlier there were periods of rapid price increases, for example, during wars. The term "inflation" appeared in connection with the massive transition of national monetary systems to the circulation of paper money. Originally the concept of "inflation" included the phenomenon of excess paper money and their further depreciation, which led to an increase in commodity prices.

The concept of

In the modern world, inflation is a consequence of a whole set of factors. This is a confirmation that it is not a purely monetary phenomenon. It is also a socio-political and economic phenomenon. The level of inflation is influenced by public sentiment and social psychology. Therefore, the appearance of the term "inflation expectations" is justified: in the event that the society expects rapid inflation, it will necessarily arise.

Inflation gradually became part of the market economy, which was facilitated by many global factors, including the universality of social transfers and price systems, the rapid growth and complexity of the production structure, the changing pricing process due to the influence of monopolistic enterprises, and the reduction of price competition. The increase in production efficiency, as a rule, is manifested not in the fall of prices, but in the increase in the mass of incomes and profits of the participants in production.

The dynamics of price increases are a prerequisite or inflation itself. The increase in public spending and the deficit of the state budget are also one of its reasons.

The magnitude of inflation

The decisive characteristic is the magnitude of inflation. The inflation rate is calculated on the basis of the consumer price index, which is published by the statistical bodies. To determine the indicator for a certain period of time, you should multiply the monthly indices and calculate the cumulative total. As historical practice shows, the higher the magnitude of inflation, the more terrible for society. Normal inflation is characterized by a price increase of 5% per year. Galloping - up to 100% per year, and hyperinflation - thousands per cent per year.

Moderate, or creeping inflation, implies a relatively low price growth. Such inflation is not considered something extraordinary. Some economists even believe that it is useful and contributes to the development of the economy. It provides an opportunity to effect an effective price adjustment in conditions of fluctuating demand and changing production features. Moderate inflation rates allow money to maintain a stable value.

A galloping level of inflation creates a greater tension in the economy, but the rise in prices can be predicted. Money very quickly becomes investment or consumer goods. The initial stage is characterized by an increase in the money supply, which outstrips the growth of prices. At the main stage, the situation changes dramatically: a sharp rise in prices can cause even a slight increase in the money supply, barter deals are flourishing, and natural exchange is expanding.

At a hyperinflation of the price increase more than on 300% for a year. Also, super-hyperinflation is singled out separately, when prices increase by 50% monthly, but this rate of inflation is not the limit. Hyperinflation is the reason that money is losing its value, the functions of the means of saving and the measure of value. The rate of price growth is much larger than the amount of money that is in circulation.

Thus, moderate inflation is permissible and does not require the use of additional anti-inflation measures to maintain stability in society.