Economic, Inflation
Assignment
Inflation
Submitted to:
Zaved Mannan
Senior Lecturer
Department of Business Administration
Submitted by:
Debasis Roy ID: (120306038)
Submitted On:
23rd November, 2013
Sec: A
Inflation Definition “Too much money in circulation causes the money to lose value”-this is the true meaning of inflation. The popular opinion about the costs of inflation is that inflation makes everyone worse off by reducing the purchasing power of incomes, eroding living standards and adding, in many ways, to life’s uncertainties. In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. Inflation refers to a rise in prices that causes the purchasing power of a nation to fall. Inflation is a normal economic development as long as the annual percentage remains low; once the percentage rises over a pre-determined level, it is considered an inflation crisis.
In another word “Inflation means that your money won’t buy as much today as you could yesterday”.
Definition of Inflation rate (consumer prices) This entry furnishes the annual percent change in consumer prices compared with the previous year 's consumer prices.
The inflation rate is the percentage rate of change of a price index over time.
Effect on the economy
General Effect
An increase in the general level of prices implies a decrease in the purchasing power of the currency. That is, when the general level of prices rises, each monetary unit buys fewer goods and services. Increases in the price level (inflation) erode the real value of money (the functional currency) and other items with an underlying monetary nature (e.g. loans and bonds). For example if one takes a loan where the stated interest rate is 6% and the inflation rate is at 3%, the real interest rate that one are paying for the loan is 3%. It would also hold true that if one had a loan at a fixed interest rate of 6% and the inflation rate
Inflation
Submitted to:
Zaved Mannan
Senior Lecturer
Department of Business Administration
Submitted by:
Debasis Roy ID: (120306038)
Submitted On:
23rd November, 2013
Sec: A
Inflation Definition “Too much money in circulation causes the money to lose value”-this is the true meaning of inflation. The popular opinion about the costs of inflation is that inflation makes everyone worse off by reducing the purchasing power of incomes, eroding living standards and adding, in many ways, to life’s uncertainties. In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. Inflation refers to a rise in prices that causes the purchasing power of a nation to fall. Inflation is a normal economic development as long as the annual percentage remains low; once the percentage rises over a pre-determined level, it is considered an inflation crisis.
In another word “Inflation means that your money won’t buy as much today as you could yesterday”.
Definition of Inflation rate (consumer prices) This entry furnishes the annual percent change in consumer prices compared with the previous year 's consumer prices.
The inflation rate is the percentage rate of change of a price index over time.
Effect on the economy
General Effect
An increase in the general level of prices implies a decrease in the purchasing power of the currency. That is, when the general level of prices rises, each monetary unit buys fewer goods and services. Increases in the price level (inflation) erode the real value of money (the functional currency) and other items with an underlying monetary nature (e.g. loans and bonds). For example if one takes a loan where the stated interest rate is 6% and the inflation rate is at 3%, the real interest rate that one are paying for the loan is 3%. It would also hold true that if one had a loan at a fixed interest rate of 6% and the inflation rate
References: Abel, Andrew; Bernanke, Ben (2005). Macroeconomics (5th ed.). Pearson Barro, Robert J. (1997). Macroeconomics. Cambridge, Mass: MIT Press. p. 895. ISBN 0-262-02436-5 Blanchard, Olivier (2000). Macroeconomics (2nd ed.). Englewood Cliffs, N.J: Prentice Hall. ISBN 0-13-013306-X Mankiw, N. Gregory (2002). Macroeconomics (5th ed.). Worth Hall, Robert E.; Taylor, John B. (1993). Macroeconomics. New York: W.W. Norton. p. 637. ISBN 0-393-96307-1 Burda, Michael C.; Wyplosz, Charles (1997). Macroeconomics: a European text. Oxford [Oxfordshire]: Oxford University Press. ISBN 0-19-877468-0