Inflation Essay

463 Words2 Pages
Introduction I chose the word inflation because it’s a term that affects our economy Central idea What do we mean by inflation? Division The origin of the word inflation is Latin. I am going to discuss what is inflation, The several variations of inflation, and the two theories that are generally accepted on what cause inflation. Development What is inflation? Inflation is the act of filing something with air for example when something is filled with air it expands or enlarges. Inflation is also a sustained increase in the general level of prices for goods and services. As inflation rises, every dollar you own buys a smaller percentage of good or service. The value of a dollar does not stay constant when there is inflation. When inflation goes up there is a decline in the purchasing power of money. For example, if the inflation rate is 2% annually, then theoretically a $1 pack of gum will cost $1.02 in a year. The several variations of inflation -Deflation- is when the general level of prices is falling. This is the opposite of inflation. - Hyperinflation- is unusually rapid inflation. In extreme, cases, this can lead to the breakdown of a nation’s monetary system. An example of hyperinflation occurred in Germany in 1923, when process rose 2,500% in one month. -Disinflation- A slowing in the rate of price inflation. Disinflation is used to describe instances when the inflation rate has reduced marginally over the short term. Although it is used to describe periods of slowing inflation, disinflation should not be confused with deflation. Disinflation is not considered to be problematic because prices do not actually drop and disinflation does not usually signal the onset of a slowing economy. In recent years, most developed countries have attempted to sustain an inflation rate of 2-3%. There is no universally cause that was agreed upon about inflation,

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