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Inflation In The World Essay

2375 words - 10 pages

The population now a days is increasing rapidly. So this increase in population is the cause of great problem. This problem (of increase in population) is not only the problem of Pakistan, India or china but every country is facing this problem. And the demands of this increasing population are also increasing which is actual cause of the problems. And the major problem is the rise in the prices of the things which in short is called inflation .this is cause of almost al other problem and every country is trying to control this problem.
Inflation is a rise in the general level of prices of goods and services in an economy over a period of time.
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The Consumer Price Index measures prices of a selection of goods and services purchased by a "typical consumer”. The inflation rate is the percentage rate of change of a price index over time.
By the nineteenth century, economists categorized three separate factors that cause a rise or fall in the price of goods: a change in the value or resource costs of the good, a change in the price of money which then was usually a fluctuation in the commodity price of the metallic content in the currency, and currency depreciation resulting from an increased supply of currency relative to the quantity of redeemable metal backing the currency. Following the proliferation of private bank note currency printed during the American Civil War, the term "inflation" started to appear as a direct reference to the currency depreciation that occurred as the quantity of redeemable bank notes outstripped the quantity of metal available for their redemption. The term inflation then referred to the devaluation of the currency, and not to a rise in the price of goods.
Causes of Inflation:¬-
There can be various reasons of inflation i.e. rising prices:
First, when people start the use of different things in abundance, so the demand of the different things increases which result in the increase in the prices of such things.

Secondly, the prices of different goods of daily use rise if their production and supply become less owing to the strikes of workers, the lock-outs of factories by the employers, flood, and absence of rain and so on.
Third, there is general rise in the standard of living of people. When there is increase in income of the people, they start living a better life; hence they need more of cloths, food, shoes and other goods of daily use.
Fourth, when education becomes more common, the people begin to read more newspapers, magazines and books.
Fifth, inflation can happen when governments print an excess of money to deal with a crisis. As a result, prices end up rising at an extremely high speed to keep up with the currency surplus. This is called the demand-pull, in which prices are forced upwards because of a high demand.
Sixth, the rise in the prices of things of daily use in international markets also has direct or indirect adverse effect upon goods produced inside the country.
Seventh, The inflation is a rise in production costs, which leads to an increase in the price of the final product. For example, if raw materials increase in price, this leads to the cost of production increasing, which in turn leads to the company increasing prices to maintain steady profits? Rising labor costs can also lead to inflation. As workers demand wage increases, companies usually chose to pass on those costs to their customers.
Eight, Inflation can also be caused by international lending and national debts. As nations borrow money, they have to deal with interests, which in the end cause prices to rise as a way of keeping up with their debts. A...

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