Inflation
Introduction
What inflation is? Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole. Subsequently, it will cause purchasing power fall. In simple terms, it means that too much of money is chasing for one particular item. When too much of money is available, the seller may raise the price of which he is willing to sell. In the long run, inflation has the potential of erasing the purchasing power of the people. It is because when the basic needs such as food and energy prices are on the rise, people simply need to fork out more just to maintain their standard of living.
There are different states of inflation. Firstly, hyperinflation is a very high rate of inflation, usually a rate in excess of 50%. Secondly, deflation is the decrease in the general price level of goods and services only when annual inflation is below 0% resulting in the real value of money. Hence, it is sometimes called “negative inflation”. Thirdly, disinflation is refers to a time when the rate of change of prices is falling while the inflation rate is positive. Lastly, stagflation is an economic situation in which inflation and economic stagnation occur simultaneously and remain unchecked for a period of time. Stagflation can result when an economy is slowed by an unfavorable supply shock, such as an increase in the price of oil in an oil importing country, which tends to raise prices at the same time that it slows the economy by making production less profitable.
How to calculate inflation rate? Consumer Price Index (CPI) is used to measure for inflation, it measures price increases and decreases consumer goods and services on a monthly basis. When the Consumer Price Index goes up, it indicates an inflationary environment.
Inflation will affect our living cost; it will cause our standard of living fall. This is because each Ringgit Malaysia buys less goods and services, so we have to spend more money to get the same goods
What inflation is? Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole. Subsequently, it will cause purchasing power fall. In simple terms, it means that too much of money is chasing for one particular item. When too much of money is available, the seller may raise the price of which he is willing to sell. In the long run, inflation has the potential of erasing the purchasing power of the people. It is because when the basic needs such as food and energy prices are on the rise, people simply need to fork out more just to maintain their standard of living.
There are different states of inflation. Firstly, hyperinflation is a very high rate of inflation, usually a rate in excess of 50%. Secondly, deflation is the decrease in the general price level of goods and services only when annual inflation is below 0% resulting in the real value of money. Hence, it is sometimes called “negative inflation”. Thirdly, disinflation is refers to a time when the rate of change of prices is falling while the inflation rate is positive. Lastly, stagflation is an economic situation in which inflation and economic stagnation occur simultaneously and remain unchecked for a period of time. Stagflation can result when an economy is slowed by an unfavorable supply shock, such as an increase in the price of oil in an oil importing country, which tends to raise prices at the same time that it slows the economy by making production less profitable.
How to calculate inflation rate? Consumer Price Index (CPI) is used to measure for inflation, it measures price increases and decreases consumer goods and services on a monthly basis. When the Consumer Price Index goes up, it indicates an inflationary environment.
Inflation will affect our living cost; it will cause our standard of living fall. This is because each Ringgit Malaysia buys less goods and services, so we have to spend more money to get the same goods