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Here are some quick answers to common questions about inflation. What does inflation mean? The word "inflation" refers to an increase in the prices consumers pay for goods and services.
For example, a sudden decrease in the supply of oil, leading to increased oil prices, can cause cost-push inflation. Producers for whom oil is a part of their costs could then pass this on to consumers in the form of increased prices. [85] Inflation expectations play a major role in forming actual inflation. High inflation can prompt employees ...
Cost-push inflation can also result from a rise in expected inflation, which in turn the workers will demand higher wages, thus causing inflation. [2] One example of cost-push inflation is the oil crisis of the 1970s, which some economists see as a major cause of the inflation experienced in the Western world in that decade.
Monetary inflation is a sustained increase in the money supply of a country (or currency area). Depending on many factors, especially public expectations, the fundamental state and development of the economy, and the transmission mechanism, it is likely to result in price inflation, which is usually just called "inflation", which is a rise in the general level of prices of goods and services.
Whether it’s demand-pull or cost-push inflation or a combination, inflation affects the stock market. For example, moderate to low inflation — when prices rise less than 3 percent — can ...
This causes people to minimize their holdings in that currency as they usually switch to more stable foreign currencies. [1] Effective capital controls and currency substitution ("dollarization") are the orthodox solutions to ending short-term hyperinflation; however there are significant social and economic costs to these policies. [ 2 ]
Second, the government can cause stagflation if it creates policies that harm industry while growing the money supply too quickly. These two things would probably have to occur together because policies that slow economic growth rarely cause inflation, and policies that cause inflation rarely slow economic growth. [citation needed]
Demand-pull inflation is in contrast with cost-push inflation, when price and wage increases are being transmitted from one sector to another. However, these can be considered as different aspects of an overall inflationary process—demand-pull inflation explains how price inflation starts, and cost-push inflation demonstrates why inflation ...