Inflation is a long and steady process. Often it is confused with a banal price increase. The inflationary process is characterized by a general increase in prices - while, for example, in certain industries or for certain product categories, a seasonal decrease in cost may be observed. In addition, the cost of goods, as a key weather vane of inflationary processes, has its own characteristics, depending on the type and cause of inflation.

What are the causes of inflation?

Traditional economics lists the following causes of inflation briefly:

• Emissions associated with rising government spending;
• State budget deficit;
• Increasing funds in circulation through active population and companies;
• Monopoly in relation to the price of specific groups of goods and products;
• Trade union monopoly in relation to the wages of workers;
• Militarization of the economy;
• Commodity shortages, the result of which is inflation of supply and demand;
• Reducing the volume of national production in real terms, provoking cost-push inflation.

The depreciation of money can take place both under the predominant influence of an external nature and internal causal components.

External Causes of Inflation

All of these reasons are found in open economies. These include:

• Crisis phenomena on a global scale, for example, a currency crisis or a production crisis.
• Rising prices for imported goods.
• falling rate national currency.

If we consider the causes of inflation in Russia, then the fall in prices for fuel and non-ferrous metals, which are the main export goods, led to its intensification.

Internal Causes of Inflation

However, not only the influence of the external market leads to inflationary processes, but also internal economic reasons in the country lead to this phenomenon.

• Insufficiency of assets in the state budget;
• Increase in the expenditure component for military purposes;
• Increase in the expenditure component for social purposes;
• Excessive investment spending within individual industries;
• Disproportions in the structure of the economy.

If we consider Russia, then the reasons for inflation are the lag of the consumer sector compared to the heavy industry, as well as the lack of regulation of the economic sector.

In studies of various economic schools it is possible to find various explanations of the reasons generating inflationary processes. But the question of the main factors remains unchanged. In science, it is customary to accept two groups of them: monetary and non-monetary.

• Monetary is directly related to the actions of the Central Bank of the Russian Federation.
• Non-monetary - other factors of economic and social nature.

Internal causes are divided into monetary and non-monetary processes. Supporters of the first assume that the sources of inflation - cash - are the key reason for the formation of inflationary changes.

The following pertain to this:

• The masses of money in circulation are increasing;
• Increasing cash turnover rates.

In this case, the further development of the inflation component is directly related to the fact that the turnover rate of monetary units is growing much faster than production growth. But the increase in the speed of turnover may be a consequence of the improvement of banking and the system.
The followers of the non-monetary theory explain the causes of inflation briefly and clearly: it is caused both by the circulation of money and by the action of the production sphere. It itself appears as a result of rising production costs, expectations of the consequences of changes in demand patterns. Further growth of wages, tax profits, etc. causes a supply shock.

The reasons in this case are:
• The balance between the mass of goods and money is disturbed;
• There is a budget deficit;
• The economy is militarized;
• Consumer goods become scarce, which automatically raises their prices;
• The monopoly of producers or trade unions disrupts the mechanism of the market;
• The actions of the state in the field of taxation are ineffective.

Since increased tax rates lead to the slowdown in the growth of production and subsequent sales of manufactured goods.

Investors lose their incentive to invest their money in production. The people are waiting for rising prices, actively buying goods for the future. This naturally causes inflation of demand and prices rise after it.
The acceleration of the flow of the inflationary component is directly related to the main economic resources. In the bulk, sluggish processes of depreciation of monetary units, an increase in unemployment or a shortage of a commodity component are formed against the backdrop of an increase in the cost of the following categories:

• Oil and oil products;
• Precious metals and significant shares;
• Key exchange indicators and indices;
• base effects.

Anti-inflation strategy

In general, in the processes of inflationary orientation, the position of two quantities "on a swing" - supply / demand, it is their balancing that directly affects the cost component of monetary units. In general, this balance is maintained by the anti-inflationary policy.
Its tasks are to maintain a balance within economic categories and industries in general. The anti-inflationary orientation of the policy is a comprehensive measure of the state. regulation of the economy, aimed at combating inflationary manifestations.

A strategy that includes measures, mechanisms with a focus on long-term results. Tactics with a range of measures and mechanisms with a focus on short-term results.
The anti-inflationary strategy consists of long-term mechanisms. Therefore, its impact is felt by the economy only after a certain time.
In the first place of this strategy is the reduction of inflationary expectations, in particular, with regard to prices. This can be achieved in two ways:

• the first is the comprehensive strengthening of market mechanisms;
• the second is the formation and implementation of a course aimed at eradicating uncontrolled inflation while increasing the confidence of the majority of the population.

The second place of this strategy is long-term monetary policy. The purpose of which is the regulation of the growth of the money supply, and the methods are strict limits on the annual growth of the money supply. In third place is the budget policy and other constituent elements of the economic economic activity.

Inflation, as well as unemployment; represents one of the most serious macroeconomic problems. As an economic phenomenon, inflation appeared almost with the emergence of money, with the functioning of which it is directly related.

inflation(from lat. inflation - swelling, swelling) - a continuous increase in the average price level in the economy, the depreciation of money, which occurs due to the fact that there are more of them in the economy than necessary, i.e. the money supply in circulation "swells".

A more rigorous definition of inflation, taking into account the causes and some consequences of an increase in the average price level in the economy, is as follows:

Inflation- imbalance of supply and demand (a form of general imbalance in the economy), manifested in rising prices and depreciation of money.

The process opposite to inflation is deflation(deflation) is a steady downward trend in the general price level.

There is also the concept disinflation(desinflation), which means a decrease in the rate of inflation.

There are many kinds and types of inflation.

So, from the point of view of the rate of price growth, there are moderate, creeping, galloping and hyperinflation.

moderate inflation(price growth is usually 3-5% per year, does not exceed 10% per year) does not pose a serious danger to the economy. Prices in this case rise gradually, but steadily, at a moderate pace (about 10% per year). The value of money is preserved, there is no risk of signing contracts at nominal prices. In industrial developed countries ah, it is considered as an element of the normal functioning of the economy, which does not cause much concern. This inflation is also called natural, since such a rise in prices does not prevent the economic system from developing successfully, does not create problems for either producers or consumers.

Creeping inflation(growth in prices from 10 to 20% per year) requires adjustment of the monetary policy of the state, as there is a danger of its transition to galloping inflation. Galloping inflation(price growth rate ranges from 20% to 200% per year) can be observed in the economic system for quite a long time. Such a pace can cause severe economic and social consequences (a drop in production, the closure of many enterprises, a decrease in the standard of living of the population, etc.), contracts are "tied" to rising prices, and money materializes at an accelerated pace. Most often, the functioning of the economy in the conditions of such inflation is depressive, there are no incentives for the development of the business sector, since the profits are "eaten away" by inflation. There are serious economic disruptions here. Money quickly loses its value, and the population quickly materializes it. Financial markets are in decline. Galloping inflation requires a radical revision of monetary policy.

Hyperinflation(annual price growth exceeds 200%) requires decision-making not only of an economic, but also of a political nature, since such high inflation rates mean a probable economic collapse of the country, primarily related to commodity-money relations. The world record was the hyperinflation in Hungary (August 1945 - July 1946), when prices rose by an average of almost 20 times a month. Hyperinflation causes the collapse of the monetary system. Money ceases to adequately fulfill its functions, the largest enterprises become unprofitable and unprofitable. Hyperinflation paralyzes the economic mechanism, since the effect of flight from money in order to turn it into goods increases sharply. Economic ties are being destroyed, a transition is being made to barter exchange.

The degree of predictability is expected (projected) inflation and unexpected inflation, i.e. sudden. Naturally, expected inflation is more preferable than unpredictable, since preliminary information about possible inflation makes it possible to develop and take a number of measures to prevent it. negative consequences. Expected inflation can be predicted for any period, or it is planned by the government of the country.

By its nature, inflation is open, suppressed and hidden.

Open (explicit) inflation manifested in a steady increase in the price level and is typical for countries with a market economy. It does not suppress or destroy the mechanism of the market.

Suppressed inflation usually due to general state control and the suppression of the market mechanism, it occurs in countries with a planned economy or in countries with strong state regulation, turning into universal control. The state assumes the function of controlling prices, artificially restraining them at a level, most often below the equilibrium level. The result is a global gap between supply and demand. Having crossed the critical point, this gap turns into an inflationary one, and a stable deficit appears in the economy. Under these conditions, the masses of commodities begin to move from the official economy to the shadow economy. Suppressed inflation creates a shadow market because it is based on a gap between administratively set prices and higher black market prices that equalize supply and demand. Thus, if open inflation finds its expression in rising prices, then suppressed inflation is expressed in a shortage in the commodity market and the development of a shadow market, suppressed inflation manifests itself in an increase in the savings of the population and firms. It is very difficult to fight this type of inflation, since market mechanisms do not work. To combat suppressed inflation, it must first be converted to open inflation. Suppressed inflation is often referred to as hidden inflation.

Some economists single out hidden inflation separately, believing that hidden inflation associated with a deterioration in the quality of products at constant prices for it or with the "washout" of cheap goods from production, and hence from consumption.

If the prices of all goods and services produced in a society rise at about the same rate, then one speaks of balanced inflation. If prices for different goods and services change in different proportions, then in the economy inflation unbalanced.

The best option for any economy is open, balanced, moderate and predictable inflation. But in reality, this situation rarely occurs. Therefore, it is believed that it is preferable to have open, balanced and predictable inflation, albeit with fairly high growth rates of the average price level and the economy, than a small inflation (up to 20% per year), but suppressed, unpredictable and unbalanced.

Inflation is the process of depreciation of money, which is accompanied by a mass of concomitant changes. In extreme cases, inflation can lead to such depreciation Money that it will give way to barter in kind (for example, Germany in the 1920s).

What is inflation

inflation is not equal simple growth prices. Inflation is such a change in the general price level (not for all goods, but in general), in which funds depreciate, losing their former purchasing power. Inflation is determined using the so-called GDP deflator, which describes the general level of prices (for example, consumer basket excluding imported goods). Prices for the current year are used, not for the previous year. Monetarists calculate inflation (or the rate of price growth) as the rate of growth of the money supply. There are also open and suppressed inflation (latent type), in conditions where prices and their changes are controlled by the state.

Inflation in Russia

In Russia, inflation, based on the level of the consumer price index, ranged from 2500 (in 1992), 839.9 (in 1993) and up to 6.1-6.5 during 2011-2013. The peculiarity of the Russian economy is that at the beginning of the 21st century the purchasing power of the national currency is constantly decreasing. At the same time, prices for most services and goods are rising. Rated economic indicators consistently higher than their actual content. Redistribution of funds and structural imbalances lead to inflationary expectations in all economic entities.

At present, the inflation rate in Russia is:

• for June 2015 - 0.19%,
• for January-June 2015 - 8.52%,
• for comparison: in June 2014 - 0.62%,
• for January-June 2014 - 4.82%,
• for 12 months - 15.29%,
• for 5 years - 51.59%,
• for 10 years - 144.23%.

inflation index

The inflation index is understood only as the consumer price index. This is a parameter that measures the overall price dynamics and the change in this level. The inflation index includes only what is used for non-productive consumption (both goods and services). In 2015, Russia ranked 12th in terms of inflation. It was also calculated from the consumer price index.

An interesting fact: during the entire existence of the USSR, the inflation index was not calculated (officially). In Russia, such an index has been calculated only since 1991.

Important: consumer prices- These are the prices that the buyer actually pays, and they already include fees and taxes.

The price index is calculated as the ratio of the value of the basket of the current year to the base.

Types of inflation

There are many types of inflation.

1. Hansen introduced such types as open and hidden (with price control by the state) inflation.

2. There is demand-pull inflation (overabundance of total demand in relation to the real volume of production), and supply inflation (price growth is caused by increased costs due to underutilization of the production resource).

3. Balanced inflation - a variant in which the prices of different goods do not change relative to each other, and unbalanced inflation (the proportions of price changes are different for different commodity items).

4. Forecast inflation is quite expected by economic entities, unpredictable inflation is not expected, often the actual growth rates of prices are higher than expected.

5. There are types of inflation and growth rates:

• creeping, or moderate - up to 10% per year,
• galloping (10-50%),
• hyperinflation (from 50% to 1-9 thousand, rarely - 10 thousand percent per year or more).

Interesting fact. Economists consider a small inflation as a component of the development of the economy, stimulating its growth. In the EU, for example, the average percentage does not exceed 3-3.5% per year.

An unusual situation is generated during hyperinflation - for example, when covering government spending by increasing the money supply (issuing funds), the opposite effect may occur - the usual economic mechanism stops.

6. The term stagflation is used to describe chronic inflation with falling production.

Causes of inflation

There are several reasons for inflation: from the monopolies of large enterprises to the growth of government spending. Among the most common are listed:

1. Increasing or out of budget public spending. In this case, the issue of money increases, the money supply exceeds the needs of commodity circulation.
2. Mass lending, if resources are collected not from savings, but from emission.
3. Lack of sufficient collateral for the national currency.
4. Monopolies: like trade unions (no optimal level wages), and companies, enterprises (the price is formed without taking into account the realities of the market, which is typical for the raw materials industries).
5. Decreasing national production combined with maintaining the level of the money supply. The reduced volume of goods and services accounts for the same amount of money.
6. Decrease in the exchange rate of the national currency while maintaining the volume of money supply.
7. Excessive inflow of foreign currencies.

Consequences of inflation

Inflation affects many areas and has a number of consequences:

There is a difference in estimates cash reserves and cash flows. As a result, depreciate:

• securities,
• account balances.

The emission of funds worsens the economic situation.

Income is being redistributed - the effects of inflation are most acutely felt

• goods importers,
• sellers,
• creditors,
• budget companies.

In the "plus" are lenders and buyers. There are so-called "imaginary incomes" due to the cheapening of the cost of goods and the cost of borrowed funds.

Falling profitability of production, GDP.

As a rule, after the rise in prices, the exchange rate of the national currency worsens.

Savings owners, end consumers, the least protected segments of the population suffer.

In fact, the poor often get even poorer.

At the same time, inflation can both worsen the situation of producers (due to an increase in prices, and hence an increase in any items of expenditure in the production of products), and improve it. The second option is possible if the products are shipped abroad and become more accessible to end users.

Another possible consequence of inflation is the so-called "inflationary spiral" (the process of self-reproduction of inflation, when inflationary expectations push prices up, and this, in turn, creates rush demand).

Components of inflation

The two components of inflation are demand-pull inflation (when people's real incomes are higher than labor productivity) and cost-push inflation (the price is pounded on the materials involved in production).

In the first case, the amount of funds received by the population is higher than the real productivity of labor in terms of each employee, and the growth of funds received exceeds the growth in the volume of services and goods offered. As a result, income growth becomes greater than the economy's ability to meet growing demand, and the prices of goods and services rise.

The second option implies that the costs of producing goods and services increase, and in order to maintain profitability, producers are forced to raise prices for them.

Comparison.ru advice: In the event of high inflation expectations, do not give in to the rush demand for goods and services. As a rule, citizens make the biggest investment mistakes when investing available funds to avoid depreciation, in the purchase of several large items of the same type, as well as in large volumes of food. The benefit is likely to be negligible.

We suggest that you familiarize yourself with such issues as the nature, types and causes of inflation. Agree, they are very relevant today. The levels of inflation, its types, measures to combat it - all this is actively discussed in last years in connection with the current situation in the world and Russian economy.

What is inflation? This is a crisis state of one kind or another monetary system. The term itself arose in relation to monetary circulation in the middle of the 19th century. It was introduced in connection with the huge issue of paper dollars during the Civil War in the United States (from 1861 to 1865). Inflation, the causes, types and nature of which we are interested in, has long been understood as an increase in commodity prices and depreciation of money. It was considered a monetary phenomenon. However, modern inflation is also associated with the general unfavorable state of development of the economy of a particular country, and not only with a decrease in the purchasing power of its monetary unit.

What does inflation lead to?

In an economy that functions normally, there should not be a significant increase in prices, that is, the depreciation of money, which means inflation. Inflation leads to a decrease in the purchasing power of money, as well as an increase in prices for services and goods. At the same time, prices for their individual types are growing unevenly.

"Age of Inflation"

According to economists, civilized countries have entered the so-called "age of inflation" in the last 30 years. The normal phenomenon of the world market economy Today inflation is considered to be 2-3%.

Some Causes of Inflation with Examples

In almost all states, there are many reasons leading to inflation. However, in each case, specific economic conditions depends on a combination of factors this process. For example, in Western Europe immediately after the end of World War II, inflation was associated with an acute shortage of many goods. Subsequently, state spending, the wage-price ratio, the transfer of inflation from other countries, and some other factors began to play the main role in unwinding this process. If we consider the former USSR, then here, along with some general patterns, one of the main causes of inflation in recent years can be considered a unique disproportionality that has arisen in the economy as a result of the functioning of the command-administrative system. Long-term development in wartime (according to some sources, the rate of accumulation reached half of the national income, while in Western countries it was only 15-20%), a high degree of monopolization monetary system, distribution and production, low share of wages in the national income, and some other features were inherent in the Soviet economy.

Hyperinflation, galloping and moderate inflation

There are different types of inflation. The most common is the allocation of the following three types:

• hyperinflation, in which more than 200% per year is a rise in prices;
• galloping inflation (from 20 to 200% per year);
• moderate, which is accompanied by their growth of no more than 10% per year.

It is considered extremely undesirable galloping, and even more so hyperinflation. These types of inflation lead to severe economic and social consequences.

Suppressed inflation

There are other divisions as well. For example, there are such types of inflation as open and suppressed. Suppressed is possible only with strict control by the state. It is characterized by demand-pull inflation, which occurs as a result of excess aggregate demand(total expenditures) in conditions under which the employment of the population is close to full. Suppressed inflation manifests itself, therefore, in an exacerbation of the shortage of goods.

In our country, such a process was observed in the 80s. In addition to the deficit, during this period the inflationary process was also characterized by the fact that at constant prices, the quality of products deteriorated, unjustified shifts in the assortment were observed (a decrease in the production of cheap goods and an increase in the production of expensive ones). Instead of one imbalance in the early 1990s (few goods - a lot of money), another emerged. The shortage of money led to a drop in demand and then to a decrease in production. The problem of non-payment has worsened. The state delayed the payment of wages to many people. It could also not fulfill its obligations for the supply of agricultural products and fuel, for defense orders. Rigid financial regulation led to the fact that investment has declined, and incentives to increase production have been undermined.

Types of open inflation

It includes the following varieties:

• inflation of costs (costs);
• stagflation;
• inflation adjusted expectations.

The first is characterized by an increase in the level of wages, which drives up the rise in prices for services and goods (it significantly outstrips the increase in wages). Stagflation occurs when there is a simultaneous reduction in output and an increase in prices. The last kind of open inflation occurs when the economy is in a situation of constant expectation of rising prices. Consumers because of this increase the consumption of services and goods, which means that their prices rise.

Creeping, galloping and hyperinflation

There are also the following types of inflation, depending on the rate at which prices are growing in the market.

1. creeping observed when the rate of price growth annually is 3-4%. It is typical for the economies of developed countries and is a stimulating factor for these states.
2. FROM galloping we encounter inflation when the average annual growth rate of prices for services and goods ranges from 10 to 50% (sometimes reaching 100%). It prevails in developing countries.
3. Hyperinflation observed when the rate of price growth increases annually by more than 100%. It is characteristic of certain periods various states experiencing a radical break in the economic structure.

However, we have not considered all types and forms of inflation. We offer another classification.

Inflation of production costs and demand

We can distinguish the following types and types of inflation, depending on the cause: inflation of production costs and demand. The latter is a functional type, characterized by an increase in aggregate market prices due to an increase in money demand for services and goods of the aggregate consumer (buyer), as well as its “separation” from aggregate supply. It usually occurs when there is excess demand. Considering the types and types of inflation, we note that demand-pull inflation can be due to various reasons.

Causes of demand inflation

It may be due to:

1. The militarization of the economy, as well as the growth of military spending. The fact is that military products and military equipment do not function on the market. The state acquires it, and then sends it to the reserve. No money is required to maintain this product, as it does not change hands.
2. Rostom public debt and budget deficit. Either the issuance of banknotes or government loans cover the budget deficit. This creates additional funds for the state, and hence additional demand.
3. Demand-pull inflation can also be due to bank credit expansion. The fact is that the expansion of credit operations of these institutions leads to the fact that the credit instruments of circulation increase, which creates additional demand for services and goods.
4. Another reason - influx into the country foreign exchange , which causes as a result of its exchange for monetary unit of this country, an increase in the volume of money supply, and hence increased demand.

Thus, demand-pull inflation occurs only when growth price level occurs as a result of an increase in aggregate demand.

Let us now turn to the consideration of cost-push inflation. Among its reasons are the following.

Causes of cost inflation

1. Decrease in labor productivity, which is caused by structural changes or cyclical fluctuations in production. They lead to the fact that the cost per unit of output increases, which means that profits decrease. This will ultimately affect the reduction in the volume of a particular production, and hence the reduction in supply and, naturally, an increase in prices.
2. Another reason - expansion of the service sector, the emergence of new species with an increase specific gravity wages and labor productivity, which is relatively low compared to production. This leads to a general increase in prices for various services.
3. It can also be distinguished high indirect taxes included in the cost of goods, which means an increase in the overall level of costs.
4. Another reason - increase in wages under certain circumstances(for example, an increase in the minimum wage). Companies are responsible for this growth through an inflationary spiral. Price increases, as well as new wage increases, follow on from the original increase.

Measures to combat inflation

Surely you are interested not only in the main types of inflation, but also in how you can deal with this phenomenon. The main ways to combat it are the following: anti-inflationary policy and monetary reforms.

Monetary reform is a partial or complete transformation in the state of the monetary system, which takes place in order to strengthen and streamline monetary circulation. A set of measures to regulate the economy, which the state carries out, carrying out the fight against inflation, are called anti-inflationary policy. Its main paths are as follows:

• regulation of money demand, using the tax and monetary mechanism by limiting the money supply, increasing the tax burden, increasing interest rates in lending, lower government spending, leading to slower economic growth;
• revenue policy, at which there is a parallel control over salary and prices by freezing them completely or limiting their growth, the implementation of which may cause social controversy.

So, you have learned what are the levels of inflation, its types and measures to combat it. Of course, inflation in the modern world is a very common phenomenon. Each of us involuntarily faces its consequences, whether we like it or not. Therefore, knowledge of such topics as the concept and types of inflation is necessary for everyone.

There is no escape from this phenomenon, since it is inherent in the very essence financial system. Our task is to learn in more detail what inflation is, what causes it and how to deal with it.

What is inflation and its types

For the first time this term appeared during the Civil War of the United States of America (1861-1865); they meant an increase in the circulation of money. But the word "inflation" in its present sense became most widespread after the end of the First World War. Since then, it has been mentioned in textbooks on economics. It was actively used during the Great Depression of 1929. The word "inflation" is actively used now by all economists when it comes to raising prices.

There is an axiom that is the essence of commodity exchange - the amount of money that is in circulation in the financial system of a particular state must correspond to the volume of products and services in the same state. If there is less goods than money, then some products cannot be bought, because there is not enough money to buy them. This leads to the fact that the demand for goods is greater than the goods themselves. In this case, in order to avoid shortages, it is necessary to raise the prices of products. It is called demand-side inflation - demand is greater than supply.

There is also supply inflation. It occurs when there is not enough money to buy the required product or service ( supply is greater than demand). Everyone has experienced this kind of inflation, when the price of goods went up due to the increase in the price of gasoline. If the demand for gasoline and food grew at the same rate, then prices would not rise, but this does not happen. The business has to spend more money to create products, and to recoup the losses, they raise prices.

What are the causes of inflation? Demand-pull inflation is due to:

• growth in wages and employment (more people get more money, but this is not reflected in the quantity of goods);
• growth in government spending (to compensate for them, the state sometimes (but not always) prints new banknotes, but this does not affect the number of goods);
• growth of investments in sectors of the economy, which then do not reimburse these costs additional amount goods and services.

Causes of supply inflation:

• wage growth (increases the cost of production due to the reimbursement of these costs by enterprises);
• rising prices for energy resources such as gas, electricity, water, gasoline (as with wages, the company wants to recover its costs by raising the price of goods);
• price increases by monopoly enterprises (monopolies have no competitors, so they can arbitrarily increase the cost without caring about buyers);
• a decrease in the volume of production (reduces supply, although demand is the same).

Inflation is also divided into predictable and unpredictable. Projected price increase- this is the one that was taken into account when planning economic activities. unpredictable is one that was not envisaged by economists, as prices rose faster than expected.

In terms of price growth, inflation is divided into creeping (less than 10% per year), galloping (10-50% per year) and hyperinflation (more than 100% per year). If a creeping increase in prices is natural for developed countries (on average 3-4%), then galloping is typical for developing countries where the economy has not yet stabilized. Hyperinflation can be called a financial catastrophe, since in this case financial relations are destabilized, and the state temporarily switches to barter exchange (direct exchange without money).

What does inflation lead to?

For example, if the volume of goods in the state has decreased, then the purchasing power of money. This can lead to the fact that the employer has increased wages, but with this money you can buy much less goods than before. Because of this, economists distinguish between nominal (usual) and real (inflation-adjusted) wages.

Another consequence of inflation is the gap between the real incomes of the rich and poor classes. State employees, pensioners, students receive a fixed amount of money from the budget. Inflation rises - the purchasing power of the income of these categories of people decreases.

One of the most negative consequences of inflation is the fall in the bank rate of the national currency. It depreciates, so more national money is needed to buy foreign currency or for foreign economic relations, and this aggravates financial position countries. This, in turn, leads to a decrease in citizens' trust in the government, which may not even be to blame for the causes of inflation.

It can be concluded that the rise in prices is a natural process, since it occurs due to the growth of wages. This means that inflation cannot be avoided, but one can be prepared for it. As the saying goes, "forewarned is forearmed".