english essay about inflation

Essay on Inflation: Types, Causes and Effects

Essay on Inflation!

Essay on the Meaning of Inflation:

Inflation and unemployment are the two most talked-about words in the contemporary society. These two are the big problems that plague all the economies. Almost everyone is sure that he knows what inflation exactly is, but it remains a source of great deal of confusion because it is difficult to define it unambiguously.

Inflation is often defined in terms of its supposed causes. Inflation exists when money supply exceeds available goods and services. Or inflation is attributed to budget deficit financing. A deficit budget may be financed by additional money creation. But the situation of monetary expansion or budget deficit may not cause price level to rise. Hence the difficulty of defining ‘inflation’ .

Inflation may be defined as ‘a sustained upward trend in the general level of prices’ and not the price of only one or two goods. G. Ackley defined inflation as ‘a persistent and appreciable rise in the general level or average of prices’ . In other words, inflation is a state of rising price level, but not rise in the price level. It is not high prices but rising prices that constitute inflation.

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It is an increase in the overall price level. A small rise in prices or a sudden rise in prices is not inflation since these may reflect the short term workings of the market. It is to be pointed out here that inflation is a state of disequilibrium when there occurs a sustained rise in price level.

It is inflation if the prices of most goods go up. However, it is difficult to detect whether there is an upward trend in prices and whether this trend is sustained. That is why inflation is difficult to define in an unambiguous sense.

Let’s measure inflation rate. Suppose, in December 2007, the consumer price index was 193.6 and, in December 2008 it was 223.8. Thus the inflation rate during the last one year was 223.8 – 193.6/193.6 × 100 = 15.6%.

As inflation is a state of rising prices, deflation may be defined as a state of falling prices but not fall in prices. Deflation is, thus, the opposite of inflation, i.e., rise in the value or purchasing power of money. Disinflation is a slowing down of the rate of inflation.

Essay on the Types of Inflation :

As the nature of inflation is not uniform in an economy for all the time, it is wise to distinguish between different types of inflation. Such analysis is useful to study the distributional and other effects of inflation as well as to recommend anti-inflationary policies.

Inflation may be caused by a variety of factors. Its intensity or pace may be different at different times. It may also be classified in accordance with the reactions of the government toward inflation.

Thus, one may observe different types of inflation in the contemporary society:

(a) According to Causes:

i. Currency Inflation:

This type of inflation is caused by the printing of currency notes.

ii. Credit Inflation:

Being profit-making institutions, commercial banks sanction more loans and advances to the public than what the economy needs. Such credit expansion leads to a rise in price level.

iii. Deficit-Induced Inflation:

The budget of the government reflects a deficit when expenditure exceeds revenue. To meet this gap, the government may ask the central bank to print additional money. Since pumping of additional money is required to meet the budget deficit, any price rise may be called deficit-induced inflation.

iv. Demand-Pull Inflation:

An increase in aggregate demand over the available output leads to a rise in the price level. Such inflation is called demand-pull inflation (henceforth DPI). But why does aggregate demand rise? Classical economists attribute this rise in aggregate demand to money supply.

If the supply of money in an economy exceeds the available goods and services, DPI appears. It has been described by Coulborn as a situation of “too much money chasing too few goods” .

Note that, in this region, price level begins to rise. Ultimately, the economy reaches full employment situation, i.e., Range 3, where output does not rise but price level is pulled upward. This is demand-pull inflation. The essence of this type of inflation is “too much spending chasing too few goods.”

v. Cost-Push Inflation:

Inflation in an economy may arise from the overall increase in the cost of production. This type of inflation is known as cost-push inflation (henceforth CPI). Cost of production may rise due to increase in the price of raw materials, wages, etc. Often trade unions are blamed for wage rise since wage rate is not market-determined. Higher wage means higher cost of production.

Prices of commodities are thereby increased. A wage-price spiral comes into operation. But, at the same time, firms are to be blamed also for the price rise since they simply raise prices to expand their profit margins. Thus we have two important variants of CPI: wage-push inflation and profit-push inflation. Anyway, CPI stems from the leftward shift of the aggregate supply curve.

The price level thus determined is OP 1 . As aggregate demand curve shifts to AD 2 , price level rises to OP 2 . Thus, an increase in aggregate demand at the full employment stage leads to an increase in price level only, rather than the level of output. However, how much price level will rise following an increase in aggregate demand depends on the slope of the AS curve.

Causes of Demand-Pull Inflation :

DPI originates in the monetary sector. Monetarists’ argument that “only money matters” is based on the assumption that at or near full employment, excessive money supply will increase aggregate demand and will thus cause inflation.

An increase in nominal money supply shifts aggregate demand curve rightward. This enables people to hold excess cash balances. Spending of excess cash balances by them causes price level to rise. Price level will continue to rise until aggregate demand equals aggregate supply.

Keynesians argue that inflation originates in the non-monetary sector or the real sector. Aggregate demand may rise if there is an increase in consumption expenditure following a tax cut. There may be an autonomous increase in business investment or government expenditure. Governmental expenditure is inflationary if the needed money is procured by the government by printing additional money.

In brief, an increase in aggregate demand i.e., increase in (C + I + G + X – M) causes price level to rise. However, aggregate demand may rise following an increase in money supply generated by the printing of additional money (classical argument) which drives prices upward. Thus, money plays a vital role. That is why Milton Friedman believes that inflation is always and everywhere a monetary phenomenon.

There are other reasons that may push aggregate demand and, hence, price level upwards. For instance, growth of population stimulates aggregate demand. Higher export earnings increase the purchasing power of the exporting countries.

Additional purchasing power means additional aggregate demand. Purchasing power and, hence, aggregate demand, may also go up if government repays public debt. Again, there is a tendency on the part of the holders of black money to spend on conspicuous consumption goods. Such tendency fuels inflationary fire. Thus, DPI is caused by a variety of factors.

Cost-Push Inflation Theory :

In addition to aggregate demand, aggregate supply also generates inflationary process. As inflation is caused by a leftward shift of the aggregate supply, we call it CPI. CPI is usually associated with the non-monetary factors. CPI arises due to the increase in cost of production. Cost of production may rise due to a rise in the cost of raw materials or increase in wages.

Such increases in costs are passed on to consumers by firms by raising the prices of the products. Rising wages lead to rising costs. Rising costs lead to rising prices. And rising prices, again, prompt trade unions to demand higher wages. Thus, an inflationary wage-price spiral starts.

This causes aggregate supply curve to shift leftward. This can be demonstrated graphically (Fig. 11.4) where AS 1 is the initial aggregate supply curve. Below the full employment stage this AS curve is positive sloping and at full employment stage it becomes perfectly inelastic. Intersection point (E 1 ) of AD 1 and AS 1 curves determines the price level.

Now, there is a leftward shift of aggregate supply curve to AS 2 . With no change in aggregate demand, this causes price level to rise to OP 2 and output to fall to OY 2 .

With the reduction in output, employment in the economy declines or unemployment rises. Further shift in the AS curve to AS 2 results in higher price level (OP 3 ) and a lower volume of aggregate output (OY 3 ). Thus, CPI may arise even below the full employment (Y f ) stage.

Causes of CPI :

It is the cost factors that pull the prices upward. One of the important causes of price rise is the rise in price of raw materials. For instance, by an administrative order the government may hike the price of petrol or diesel or freight rate. Firms buy these inputs now at a higher price. This leads to an upward pressure on cost of production.

Not only this, CPI is often imported from outside the economy. Increase in the price of petrol by OPEC compels the government to increase the price of petrol and diesel. These two important raw materials are needed by every sector, especially the transport sector. As a result, transport costs go up resulting in higher general price level.

Again, CPI may be induced by wage-push inflation or profit-push inflation. Trade unions demand higher money wages as a compensation against inflationary price rise. If increase in money wages exceeds labour productivity, aggregate supply will shift upward and leftward. Firms often exercise power by pushing up prices independently of consumer demand to expand their profit margins.

Fiscal policy changes, such as an increase in tax rates leads to an upward pressure in cost of production. For instance, an overall increase in excise tax of mass consumption goods is definitely inflationary. That is why government is then accused of causing inflation.

Finally, production setbacks may result in decreases in output. Natural disaster, exhaustion of natural resources, work stoppages, electric power cuts, etc., may cause aggregate output to decline.

In the midst of this output reduction, artificial scarcity of any goods by traders and hoarders just simply ignite the situation.

Inefficiency, corruption, mismanagement of the economy may also be the other reasons. Thus, inflation is caused by the interplay of various factors. A particular factor cannot be held responsible for inflationary price rise.

Essay on the Effects of Inflation :

People’s desires are inconsistent. When they act as buyers they want prices of goods and services to remain stable but as sellers they expect the prices of goods and services should go up. Such a happy outcome may arise for some individuals; “but, when this happens, others will be getting the worst of both worlds.” Since inflation reduces purchasing power it is bad.

The old people are in the habit of recalling the days when the price of say, meat per kilogram cost just 10 rupees. Today it is Rs. 250 per kilogram. This is true for all other commodities. When they enjoyed a better living standard. Imagine today, how worse we are! But meanwhile, wages and salaries of people have risen to a great height, compared to the ‘good old days’. This goes unusually untold.

When price level goes up, there is both a gainer and a loser. To evaluate the consequence of inflation, one must identify the nature of inflation which may be anticipated and unanticipated. If inflation is anticipated, people can adjust with the new situation and costs of inflation to the society will be smaller.

In reality, people cannot predict accurately future events or people often make mistakes in predicting the course of inflation. In other words, inflation may be unanticipated when people fail to adjust completely. This creates various problems.

One can study the effects of unanticipated inflation under two broad headings:

(i) Effect on distribution of income and wealth

(ii) Effect on economic growth.

(a) Effects of Inflation on Income and Wealth Distribution :

During inflation, usually people experience rise in incomes. But some people gain during inflation at the expense of others. Some individuals gain because their money incomes rise more rapidly than the prices and some lose because prices rise more rapidly than their incomes during inflation. Thus, it redistributes income and wealth.

Though no conclusive evidence can be cited, it can be asserted that following categories of people are affected by inflation differently:

i. Creditors and Debtors:

Borrowers gain and lenders lose during inflation because debts are fixed in rupee terms. When debts are repaid their real value declines by the price level increase and, hence, creditors lose. An individual may be interested in buying a house by taking a loan of Rs. 7 lakh from an institution for 7 years.

The borrower now welcomes inflation since he will have to pay less in real terms than when it was borrowed. Lender, in the process, loses since the rate of interest payable remains unaltered as per agreement. Because of inflation, the borrower is given ‘dear’ rupees, but pays back ‘cheap’ rupees.

However, if in an inflation-ridden economy creditors chronically loose, it is wise not to advance loans or to shut down business. Never does it happen. Rather, the loan- giving institution makes adequate safeguard against the erosion of real value.

ii. Bond and Debenture-Holders:

In an economy, there are some people who live on interest income—they suffer most.

Bondholders earn fixed interest income:

These people suffer a reduction in real income when prices rise. In other words, the value of one’s savings decline if the interest rate falls short of inflation rate. Similarly, beneficiaries from life insurance programmes are also hit badly by inflation since real value of savings deteriorate.

iii. Investors:

People who put their money in shares during inflation are expected to gain since the possibility of earning business profit brightens. Higher profit induces owners of firms to distribute profit among investors or shareholders.

iv. Salaried People and Wage-Earners:

Anyone earning a fixed income is damaged by inflation. Sometimes, unionized worker succeeds in raising wage rates of white-collar workers as a compensation against price rise. But wage rate changes with a long time lag. In other words, wage rate increases always lag behind price increases.

Naturally, inflation results in a reduction in real purchasing power of fixed income earners. On the other hand, people earning flexible incomes may gain during inflation. The nominal incomes of such people outstrip the general price rise. As a result, real incomes of this income group increase.

v. Profit-Earners, Speculators and Black Marketeers:

It is argued that profit-earners gain from inflation. Profit tends to rise during inflation. Seeing inflation, businessmen raise the prices of their products. This results in a bigger profit. Profit margin, however, may not be high when the rate of inflation climbs to a high level.

However, speculators dealing in business in essential commodities usually stand to gain by inflation. Black marketeers are also benefited by inflation.

Thus, there occurs a redistribution of income and wealth. It is said that rich becomes richer and poor becomes poorer during inflation. However, no such hard and fast generalizations can be made. It is clear that someone wins and someone loses from inflation.

These effects of inflation may persist if inflation is unanticipated. However, the redistributive burdens of inflation on income and wealth are most likely to be minimal if inflation is anticipated by the people.

With anticipated inflation, people can build up their strategies to cope with inflation. If the annual rate of inflation in an economy is anticipated correctly people will try to protect them against losses resulting from inflation.

Workers will demand 10 p.c. wage increase if inflation is expected to rise by 10 p.c. Similarly, a percentage of inflation premium will be demanded by creditors from debtors. Business firms will also fix prices of their products in accordance with the anticipated price rise. Now if the entire society “learns to live with inflation” , the redistributive effect of inflation will be minimal.

However, it is difficult to anticipate properly every episode of inflation. Further, even if it is anticipated it cannot be perfect. In addition, adjustment with the new expected inflationary conditions may not be possible for all categories of people. Thus, adverse redistributive effects are likely to occur.

Finally, anticipated inflation may also be costly to the society. If people’s expectation regarding future price rise become stronger they will hold less liquid money. Mere holding of cash balances during inflation is unwise since its real value declines. That is why people use their money balances in buying real estate, gold, jewellery, etc.

Such investment is referred to as unproductive investment. Thus, during inflation of anticipated variety, there occurs a diversion of resources from priority to non-priority or unproductive sectors.

b. Effect on Production and Economic Growth :

Inflation may or may not result in higher output. Below the full employment stage, inflation has a favourable effect on production. In general, profit is a rising function of the price level. An inflationary situation gives an incentive to businessmen to raise prices of their products so as to earn higher doses of profit.

Rising price and rising profit encourage firms to make larger investments. As a result, the multiplier effect of investment will come into operation resulting in higher national output. However, such a favourable effect of inflation will be temporary if wages and production costs rise very rapidly.

Further, inflationary situation may be associated with the fall in output, particularly if inflation is of the cost-push variety. Thus, there is no strict relationship between prices and output. An increase in aggregate demand will increase both prices and output, but a supply shock will raise prices and lower output.

Inflation may also lower down further production levels. It is commonly assumed that if inflationary tendencies nurtured by experienced inflation persist in future, people will now save less and consume more. Rising saving propensities will result in lower further outputs.

One may also argue that inflation creates an air of uncertainty in the minds of business community, particularly when the rate of inflation fluctuates. In the midst of rising inflationary trend, firms cannot accurately estimate their costs and revenues. Under the circumstance, business firms may be deterred in investing. This will adversely affect the growth performance of the economy.

However, slight dose of inflation is necessary for economic growth. Mild inflation has an encouraging effect on national output. But it is difficult to make the price rise of a creeping variety. High rate of inflation acts as a disincentive to long run economic growth. The way the hyperinflation affects economic growth is summed up here.

We know that hyperinflation discourages savings. A fall in savings means a lower rate of capital formation. A low rate of capital formation hinders economic growth. Further, during excessive price rise, there occurs an increase in unproductive investment in real estate, gold, jewellery, etc.

Above all, speculative businesses flourish during inflation resulting in artificial scarcities and, hence, further rise in prices. Again, following hyperinflation, export earnings decline resulting in a wide imbalance in the balance of payments account.

Often, galloping inflation results in a ‘flight’ of capital to foreign countries since people lose confidence and faith over the monetary arrangements of the country, thereby resulting in a scarcity of resources. Finally, real value of tax revenue also declines under the impact of hyperinflation. Government then experiences a shortfall in investible resources.

Thus, economists and policy makers are unanimous regarding the dangers of high price rise. But the consequence of hyperinflation is disastrous. In the past, some of the world economies (e.g., Germany after the First World War (1914-1918), Latin American countries in the 1980s) had been greatly ravaged by hyperinflation.

The German Inflation of 1920s was also Catastrophic:

During 1922, the German price level went up 5,470 per cent, in 1923, the situation worsened; the German price level rose 1,300,000,000 times. By October of 1923, the postage of the lightest letter sent from Germany to the United States was 200,000 marks.

Butter cost 1.5 million marks per pound, meat 2 million marks, a loaf of bread 200,000 marks, and an egg 60,000 marks Prices increased so rapidly that waiters changed the prices on the menu several times during the course of a lunch!! Sometimes, customers had to pay double the price listed on the menu when they observed it first!!!

During October 2008, Zimbabwe, under the President-ship of Robert G. Mugabe, experienced 231,000,000 p.c. (2.31 million p.c.) as against 1.2 million p.c. price rise in September 2008—a record after 1923. It is an unbelievable rate. In May 2008, the cost of price of a toilet paper itself and not the costs of the roll of the toilet paper came to 417 Zimbabwean dollars.

Anyway, people are harassed ultimately by the high rate of inflation. That is why it is said that ‘inflation is our public enemy number one’. Rising inflation rate is a sign of failure on the part of the government.

Related Articles:

• Essay on the Causes of Inflation (473 Words)
• Cost-Push Inflation and Demand-Pull or Mixed Inflation
• Demand Pull Inflation and Cost Push Inflation | Money
• Essay on Inflation: Meaning, Measurement and Causes

What is inflation?

Inflation has been top of mind for many over the past few years. But how long will it persist? In June 2022, inflation in the United States jumped to 9.1 percent, reaching the highest level since February 1982. The inflation rate has since slowed in the United States , as well as in Europe , Japan , and the United Kingdom , particularly in the final months of 2023. But even though global inflation is higher than it was before the COVID-19 pandemic, when it hovered around 2 percent, it’s receding to historical levels . In fact, by late 2022, investors were predicting that long-term inflation would settle around a modest 2.5 percent. That’s a far cry from fears that long-term inflation would mimic trends of the 1970s and early 1980s—when inflation exceeded 10 percent.

Get to know and directly engage with senior McKinsey experts on inflation.

Ondrej Burkacky is a senior partner in McKinsey’s Munich office, Axel Karlsson is a senior partner in the Stockholm office, Fernando Perez is a senior partner in the Miami office, Emily Reasor is a senior partner in the Denver office, and Daniel Swan is a senior partner in the Stamford, Connecticut, office.

Inflation refers to a broad rise in the prices of goods and services across the economy over time, eroding purchasing power for both consumers and businesses. Economic theory and practice, observed for many years and across many countries, shows that long-lasting periods of inflation are caused in large part by what’s known as an easy monetary policy . In other words, when a country’s central bank sets the interest rate too low or increases money growth too rapidly, inflation goes up. As a result, your dollar (or whatever currency you use) will not go as far  today as it did yesterday. For example: in 1970, the average cup of coffee in the United States cost 25 cents; by 2019, it had climbed to $1.59. So for $5, you would have been able to buy about three cups of coffee in 2019, versus 20 cups in 1970. That’s inflation, and it isn’t limited to price spikes for any single item or service; it refers to increases in prices across a sector, such as retail or automotive—and, ultimately, a country’s economy.

How does inflation affect your daily life? You’ve probably seen high rates of inflation reflected in your bills—from groceries to utilities to even higher mortgage payments. Executives and corporate leaders have had to reckon with the effects of inflation too, figuring out how to protect margins while paying more for raw materials.

But inflation isn’t all bad. In a healthy economy, annual inflation is typically in the range of two percentage points, which is what economists consider a sign of pricing stability. When inflation is in this range, it can have positive effects: it can stimulate spending and thus spur demand and productivity when the economy is slowing down and needs a boost. But when inflation begins to surpass wage growth, it can be a warning sign of a struggling economy.

Introducing McKinsey Explainers : Direct answers to complex questions

Inflation may be declining in many markets, but there’s still uncertainty ahead: without a significant surge in productivity, Western economies may be headed for a period of sustained inflation or major economic reset , as Japan has experienced in the first decades of the 21st century.

What does seem to be changing are leaders’ attitudes. According to the 2023 year-end McKinsey Global Survey on economic conditions , respondents reported less fear about inflation as a risk to global and domestic economic growth . But this sentiment varies significantly by region: European respondents were most concerned about the effects of inflation, whereas respondents in North America offered brighter views.

What causes inflation?

Monetary policy is a critical driver of inflation over the long term. The current high rate of inflation is a result of increased money supply , high raw materials costs , labor mismatches , and supply disruptions —exacerbated by geopolitical conflict .

In general, there are two primary types, or causes, of short-term inflation:

• Demand-pull inflation occurs when the demand for goods and services in the economy exceeds the economy’s ability to produce them. For example, when demand for new cars recovered more quickly than anticipated from its sharp dip at the beginning of the COVID-19 pandemic, an intervening shortage  in the supply of semiconductors  made it hard for the automotive industry to keep up with this renewed demand. The subsequent shortage of new vehicles resulted in a spike in prices for new and used cars.
• Cost-push inflation occurs when the rising price of input goods and services increases the price of final goods and services. For example, commodity prices spiked sharply  during the pandemic as a result of radical shifts in demand, buying patterns, cost to serve, and perceived value across sectors and value chains. To offset inflation and minimize impact on financial performance, industrial companies were forced to increase prices for end consumers.

Learn more about McKinsey’s Growth, Marketing & Sales  Practice.

What are some periods in history with high inflation?

Economists frequently compare the current inflationary period with the post–World War II era , when price controls, supply problems, and extraordinary demand in the United States fueled double-digit inflation gains—peaking at 20 percent in 1947—before subsiding at the end of the decade. Consumption patterns today have been similarly distorted, and supply chains have been disrupted  by the pandemic.

The period from the mid-1960s through the early 1980s in the United States, sometimes called the “Great Inflation,” saw some of the country’s highest rates of inflation, with a peak of 14.8 percent in 1980. To combat this inflation, the Federal Reserve raised interest rates to nearly 20 percent. Some economists attribute this episode partially to monetary policy mistakes rather than to other causes, such as high oil prices. The Great Inflation signaled the need for public trust  in the Federal Reserve’s ability to lessen inflationary pressures.

Inflation isn’t solely a modern-day phenomenon, of course. One very early example of inflation comes from Roman times, from around 200 to 300 CE. Roman leaders were struggling to fund an army big enough to deal with attackers from multiple fronts. To help, they watered down  the silver in their coinage, causing the value of money to slowly fall—and inflation to pick up. This led merchants to raise their prices, causing widespread panic. In response, the emperor Diocletian issued what’s now known as the Edict on Maximum Prices, a series of price and wage controls designed to stop the rise of prices and wages (one helpful control was a maximum price for a male lion). But because the edict didn’t address the root cause of inflation—the impure silver coin—it didn’t fix the problem.

How is inflation measured?

Statistical agencies measure inflation first by determining the current value of a “basket” of various goods and services consumed by households, referred to as a price index. To calculate the rate of inflation over time, statisticians compare the value of the index over one period with that of another. Comparing one month with another gives a monthly rate of inflation, and comparing from year to year gives an annual rate of inflation.

In the United States, the Bureau of Labor Statistics publishes its Consumer Price Index (CPI), which measures the cost of items that urban consumers buy out of pocket. The CPI is broken down by region and is reported for the country as a whole. The Personal Consumption Expenditures (PCE) price index —published by the US Bureau of Economic Analysis—takes into account a broader range of consumer spending, including on healthcare. It is also weighted by data acquired through business surveys.

How does inflation affect consumers and companies differently?

Inflation affects consumers most directly, but businesses can also feel the impact:

• Consumers lose purchasing power when the prices of items they buy, such as food, utilities, and gasoline, increase. This can lead to household belt-tightening and growing pessimism about the economy .
• Companies lose purchasing power and risk seeing their margins decline , when prices increase for inputs used in production. These can include raw materials like coal and crude oil , intermediate products such as flour and steel, and finished machinery. In response, companies typically raise the prices of their products or services to offset inflation, meaning consumers absorb these price increases. The challenge for many companies is to strike the right balance between raising prices to cover input cost increases while simultaneously ensuring that they don’t raise prices so much that they suppress demand.

How can organizations respond to high inflation?

During periods of high inflation, companies typically pay more for materials , which decreases their margins. One way for companies to offset losses and maintain margins is by raising prices for consumers. However, if price increases are not executed thoughtfully, companies can damage customer relationships and depress sales —ultimately eroding the profits they were trying to protect.

When done successfully, recovering the cost of inflation for a given product can strengthen relationships and overall margins. There are five steps companies can take to ADAPT  (adjust, develop, accelerate, plan, and track) to inflation:

• Adjust discounting and promotions and maximize nonprice levers. This can include lengthening production schedules or adding surcharges and delivery fees for rush or low-volume orders.
• Develop the art and science of price change. Instead of making across-the-board price changes, tailor pricing actions to account for inflation exposure, customer willingness to pay, and product attributes.
• Accelerate decision making tenfold. Establish an “inflation council” that includes dedicated cross-functional, inflation-focused decision makers who can act quickly and nimbly on customer feedback.
• Plan options beyond pricing to reduce costs. Use “value engineering” to reimagine a portfolio and provide cost-reducing alternatives to price increases.
• Track execution relentlessly. Create a central supporting team to address revenue leakage and to manage performance rigorously. Traditional performance metrics can be less reliable when inflation is high .

Beyond pricing, a variety of commercial and technical levers can help companies deal with price increases in an inflationary market , but other sectors may require a more tailored response to pricing.

Learn more about our Financial Services , Industrials & Electronics , Operations , Strategy & Corporate Finance , and  Growth, Marketing & Sales Practices.

How can CEOs help protect their organizations against uncertainty during periods of high inflation?

In today’s uncertain environment, in which organizations have a much wider range of stakeholders, leaders must think about performance beyond short-term profitability. CEOs should lead with the complete business cycle and their complete slate of stakeholders in mind.

CEOs need an inflation management playbook , just as central bankers do. Here are some important areas to keep in mind while scripting it:

• Design. Leaders should motivate their organizations to raise the profile of design  to a C-suite topic. Design choices for products and services are critical for responding to price volatility, scarcity of components, and higher production and servicing costs.
• Supply chain. The most difficult task for CEOs may be convincing investors to accept supply chain resiliency as the new table stakes. Given geopolitical and economic realities, supply chain resiliency has become a crucial goal for supply chain leaders, alongside cost optimization.
• Procurement. CEOs who empower their procurement  organizations can raise the bar on value-creating contributions. Procurement leaders have told us time and again that the current market environment is the toughest they’ve experienced in decades. CEOs are beginning to recognize that purchasing leaders can be strategic partners by expanding their focus beyond cost cutting to value creation.
• Feedback. A CEO can take a lead role in playing back the feedback the organization is hearing. In today’s tight labor market, CEOs should guide their companies to take a new approach to talent, focusing on compensation, cultural factors, and psychological safety .
• Pricing. Forging new pricing relationships with customers will test CEOs in their role as the “ultimate integrator.” Repricing during inflationary times is typically unpleasant for companies and customers alike. With setting new prices, CEOs have the opportunity to forge deeper relationships with customers, by turning to promotions, personalization , and refreshed communications around value.
• Agility. CEOs can strive to achieve a focus based more on strategic action and less on firefighting. Managing the implications of inflation calls for a cross-functional, disciplined, and agile response.

A practical example: How is inflation affecting the US healthcare industry?

Consumer prices for healthcare have rarely risen faster than the rate of inflation—but that’s what’s happening today. The impact of inflation on the broader economy has caused healthcare costs to rise faster than the rate of inflation. Experts also expect continued labor shortages in healthcare—gaps of up to 450,000 registered nurses and 80,000 doctors —even as demand for services continues to rise. This drives up consumer prices and means that higher inflation could persist. McKinsey analysis as of 2022 predicted that the annual US health expenditure is likely to be $370 billion higher by 2027 because of inflation.

This climate of risk could spur healthcare leaders to address productivity, using tech levers to boost productivity while also reducing costs. In order to weather the storm, leaders will need to quickly set high aspirations, align their organizations around them, and execute with speed .

What is deflation?

If inflation is one extreme of the pricing spectrum, deflation is the other. Deflation occurs when the overall level of prices in an economy declines and the purchasing power of currency increases. It can be driven by growth in productivity and the abundance of goods and services, by a decrease in demand, or by a decline in the supply of money and credit.

Generally, moderate deflation positively affects consumers’ pocketbooks, as they can purchase more with less money. However, deflation can be a sign of a weakening economy, leading to recessions and depressions. While inflation reduces purchasing power, it also reduces the value of debt. During a period of deflation, on the other hand, debt becomes more expensive. And for consumers, investments such as stocks, corporate bonds, and real estate become riskier.

A recent period of deflation in the United States was the Great Recession, between 2007 and 2008. In December 2008, more than half of executives surveyed by McKinsey  expected deflation in their countries, and 44 percent expected to decrease the size of their workforces.

When taken to their extremes, both inflation and deflation can have significant negative effects on consumers, businesses, and investors.

For more in-depth exploration of these topics, see McKinsey’s Operations Insights  collection. Learn more about Operations consulting , and check out operations-related job opportunities  if you’re interested in working at McKinsey.

Articles referenced:

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• “ Economic conditions outlook during turbulent times, December 2023 ,” December 20, 2023
• “ Forward Thinking on why we ignore inflation—from ancient times to the present—at our peril with Stephen King ,” November 1, 2023
• “ Procurement 2023: Ten CPO actions to defy the toughest challenges ,” March 6, 2023, Roman Belotserkovskiy , Carolina Mazuera, Marta Mussacaleca , Marc Sommerer, and Jan Vandaele
• “ Why you can’t tread water when inflation is persistently high ,” February 2, 2023, Marc Goedhart and Rosen Kotsev
• “ Markets versus textbooks: Calculating today’s cost of equity ,” January 24, 2023, Vartika Gupta, David Kohn, Tim Koller , and Werner Rehm  
• “ Inflation-weary Americans are increasingly pessimistic about the economy ,” December 13, 2022, Gonzalo Charro, Andre Dua , Kweilin Ellingrud , Ryan Luby, and Sarah Pemberton
• “ Inflation fighter and value creator: Procurement’s best-kept secret ,” October 31, 2022, Roman Belotserkovskiy , Ezra Greenberg , Daphne Luchtenberg, and Marta Mussacaleca
• “ Prime Numbers: Rethink performance metrics when inflation is high ,” October 28, 2022, Vartika Gupta, David Kohn, Tim Koller , and Werner Rehm
• “ The gathering storm: The threat to employee healthcare benefits ,” October 20, 2022, Aditya Gupta , Akshay Kapur , Monisha Machado-Pereira , and Shubham Singhal
• “ Utility procurement: Ready to meet new market challenges ,” October 7, 2022, Roman Belotserkovskiy , Abhay Prasanna, and Anton Stetsenko
• “ The gathering storm: The transformative impact of inflation on the healthcare sector ,” September 19, 2022, Addie Fleron, Aneesh Krishna , and Shubham Singhal
• “ Pricing during inflation: Active management can preserve sustainable value ,” August 19, 2022, Niels Adler and Nicolas Magnette
• “ Navigating inflation: A new playbook for CEOs ,” April 14, 2022, Asutosh Padhi , Sven Smit , Ezra Greenberg , and Roman Belotserkovskiy
• “ How business operations can respond to price increases: A CEO guide ,” March 11, 2022, Andreas Behrendt ,  Axel Karlsson , Tarek Kasah, and  Daniel Swan
• “ Five ways to ADAPT pricing to inflation ,” February 25, 2022,  Alex Abdelnour , Eric Bykowsky, Jesse Nading,  Emily Reasor , and Ankit Sood
• “ How COVID-19 is reshaping supply chains ,” November 23, 2021,  Knut Alicke ,  Ed Barriball , and Vera Trautwein
• “ Navigating the labor mismatch in US logistics and supply chains ,” December 10, 2021,  Dilip Bhattacharjee , Felipe Bustamante, Andrew Curley, and  Fernando Perez
• “ Coping with the auto-semiconductor shortage: Strategies for success ,” May 27, 2021,  Ondrej Burkacky , Stephanie Lingemann, and Klaus Pototzky

This article was updated in April 2024; it was originally published in August 2022.

Want to know more about inflation?

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Home — Essay Samples — Economics — Political Economy — Inflation

Essays on Inflation

Inflation essay topics and outline examples, essay title 1: understanding inflation: causes, effects, and economic policy responses.

Thesis Statement: This essay provides a comprehensive analysis of inflation, exploring its root causes, the economic and societal effects it generates, and the various policy measures employed by governments and central banks to manage and mitigate inflationary pressures.

• Introduction
• Defining Inflation: Concept and Measurement
• Causes of Inflation: Demand-Pull, Cost-Push, and Monetary Factors
• Effects of Inflation on Individuals, Businesses, and the Economy
• Inflationary Policies: Central Bank Actions and Government Interventions
• Case Studies: Historical Inflationary Periods and Their Consequences
• Challenges in Inflation Management: Balancing Growth and Price Stability

Essay Title 2: Inflation and Its Impact on Consumer Purchasing Power: A Closer Look at the Cost of Living

Thesis Statement: This essay focuses on the effects of inflation on consumer purchasing power, analyzing how rising prices affect the cost of living, household budgets, and the strategies individuals employ to cope with inflation-induced challenges.

• Inflation's Impact on Prices: Understanding the Cost of Living Index
• Consumer Behavior and Inflation: Adjustments in Spending Patterns
• Income Inequality and Inflation: Examining Disparities in Financial Resilience
• Financial Planning Strategies: Savings, Investments, and Inflation Hedges
• Government Interventions: Indexation, Wage Controls, and Social Programs
• The Global Perspective: Inflation in Different Economies and Regions

Essay Title 3: Hyperinflation and Economic Crises: Case Studies and Lessons from History

Thesis Statement: This essay explores hyperinflation as an extreme form of inflation, examines historical case studies of hyperinflationary crises, and draws lessons on the devastating economic and social consequences that result from unchecked inflationary pressures.

• Defining Hyperinflation: Thresholds and Characteristics
• Case Study 1: Weimar Republic (Germany) and the Hyperinflation of 1923
• Case Study 2: Zimbabwe's Hyperinflationary Collapse in the Late 2000s
• Impact on Society: Currency Devaluation, Poverty, and Social Unrest
• Responses and Recovery: Stabilizing Currencies and Rebuilding Economies
• Preventative Measures: Policies to Avoid Hyperinflationary Crises

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Essay on Inflation

Inflation is a term that resonates through the corridors of our daily lives, affecting decisions made by individuals, businesses, and governments alike. It refers to the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks attempt to limit inflation, and avoid deflation, to keep the economy running smoothly. This essay delves into the causes of inflation, its various effects on the economy and individuals, and the strategies employed to manage it, aiming to provide a comprehensive understanding suitable for a student participating in an essay writing competition.

The Causes of Inflation

Inflation is primarily caused by two factors: demand-pull and cost-push inflation. Demand-pull inflation occurs when demand for goods and services exceeds supply, causing prices to rise. This can happen due to increased consumer spending, government expenditure, or investment. Cost-push inflation, on the other hand, happens when the cost of production increases, leading producers to raise prices to maintain their profit margins. This increase in production costs can be due to rising wages, increased taxes, or higher prices for raw materials.

• Demand-pull inflation occurs when the overall demand for goods and services in an economy exceeds its supply. This excess demand leads to rising prices as businesses raise prices to capitalize on increased consumer demand.
• Factors contributing to demand-pull inflation include robust consumer spending, increased government spending, low-interest rates, and high levels of investment.
• Cost-push inflation is driven by rising production costs, which are then passed on to consumers in the form of higher prices. These rising costs can result from various factors, such as increased wages, higher energy prices, or supply chain disruptions.
• For example, if oil prices spike, it can lead to increased transportation costs, which may cause businesses to raise prices on their products.
• Built-in inflation, also known as the wage-price spiral, occurs when workers demand higher wages to keep up with rising prices. When businesses pay higher wages, they often pass those costs on to consumers, causing prices to rise further. This cycle can continue, perpetuating inflation.
• Expectations of future inflation can also contribute to built-in inflation, as people adjust their behavior and spending patterns in anticipation of rising prices.
• The policies of central banks, such as the Federal Reserve in the United States, can influence inflation. When central banks implement loose monetary policies, such as low-interest rates and quantitative easing, it can increase the money supply and potentially lead to demand-pull inflation.
• Central banks can also use tight monetary policies, such as raising interest rates, to combat inflation and reduce spending.
• Government fiscal policies, including changes in taxation and government spending, can affect inflation. An increase in government spending without corresponding revenue sources can stimulate demand and contribute to inflation.
• Tax cuts can also increase disposable income, leading to higher consumer spending and potential demand-pull inflation.
• Exchange rate fluctuations can impact inflation by influencing the prices of imported goods. A depreciating domestic currency can make imports more expensive, contributing to cost-push inflation.
• Conversely, a strengthening currency can lower import prices and help reduce inflation.
• Unforeseen events, such as natural disasters, geopolitical tensions, or disruptions in the supply chain, can cause sudden supply shortages or surpluses. These shocks can result in sharp price movements and contribute to inflation.
• For instance, a severe drought can reduce agricultural output, leading to higher food prices.
• Global economic conditions and trends, such as changes in international commodity prices or global economic growth, can influence inflation in individual countries.
• Economic policies in major trading partners can also have spill-over effects on domestic inflation.

The Effects of Inflation

Inflation impacts various facets of the economy and society. Moderate inflation is a sign of a growing economy, but high inflation can have detrimental effects.

Economic Effects

1. Reduced Purchasing Power: Inflation erodes the purchasing power of money, meaning consumers can buy less with the same amount of money. This reduction can impact living standards and consumer spending.

2. Income Redistribution: Inflation can act as a regressive tax, hitting harder on low-income families. Fixed-income recipients, such as pensioners, find their incomes do not stretch as far, while borrowers may benefit from repaying loans with money that is worth less.

3. Investment Uncertainty: High inflation can lead to uncertainty in the investment market. Investors become wary of long-term investments due to the unpredictability of future costs and returns.

Social Effects

1. Cost of Living: As the cost of goods and services increases, individuals may struggle to afford basic necessities, leading to a lower quality of life.

2. Wage-Price Spiral: Continuous inflation can lead to a wage-price spiral, where workers demand higher wages to keep up with rising prices, which in turn causes prices to rise further.

3. Access to Education and Healthcare: Rising costs can make education and healthcare less accessible to the general population, affecting long-term social and economic development.

Managing Inflation

Governments and central banks use various tools to manage inflation, aiming to maintain it at a level that promotes economic stability and growth.

Monetary Policy

The most common tool for managing inflation is monetary policy, which involves regulating the money supply and interest rates. Central banks can increase interest rates to reduce spending and borrowing, thereby slowing down the economy and reducing inflation. Conversely, lowering interest rates can stimulate spending and investment, increasing demand and potentially causing inflation.

Fiscal Policy

Governments can also use fiscal policy to control inflation by adjusting spending and taxation. Reducing government spending or increasing taxes can decrease the overall demand in the economy, lowering inflation. However, these measures can be unpopular politically as they may lead to reduced public services and higher taxes.

Supply-Side Policies

Improving efficiency and increasing supply can also combat inflation. This can be achieved through investment in technology, deregulation, and policies aimed at increasing productivity. By increasing the supply of goods and services, prices can stabilize or even decrease.

In conclusion, Inflation is a complex phenomenon with wide-ranging effects on the economy and society. Understanding its causes and impacts is crucial for effective management and policy-making. While moderate inflation is a sign of a healthy economy, unchecked inflation can lead to significant economic and social challenges. Through a combination of monetary, fiscal, and supply-side policies, governments and central banks strive to balance inflation to ensure economic stability and growth. As students delve into the intricacies of inflation, they gain insight into the delicate balance required to manage an economy, preparing them for informed citizenship and, possibly, roles in shaping economic policy in the future.

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Essay on Inflation – Causes, Effects, and Mitigation

Essay on Inflation

Introduction:.

Inflation, the gradual increase in the general price level of goods and services in an economy, is a phenomenon that affects individuals, businesses, and governments worldwide. While moderate inflation is considered a normal part of a healthy economy, excessive inflation can lead to various economic challenges. This essay explores the causes, effects, and possible measures to mitigate inflation.

Causes of Inflation:

• Demand-Pull Inflation: One common cause of inflation is demand-pull inflation, where the overall demand for goods and services surpasses the available supply. This can result from increased consumer spending, investment, or government expenditures, leading to higher prices.
• Cost-Push Inflation: Cost-push inflation occurs when the costs of production rise, causing businesses to pass on these increased costs to consumers in the form of higher prices for goods and services. Factors such as rising wages, increased raw material costs, or external shocks can contribute to cost-push inflation.
• Built-in Inflation: Built-in inflation, also known as wage-price inflation, occurs when workers demand higher wages, and businesses, in turn, increase prices to maintain profit margins. This creates a cycle where higher wages lead to higher prices, and vice versa.

Effects of Inflation:

• Reduced Purchasing Power: Inflation erodes the purchasing power of money, as the same amount of currency can buy fewer goods and services over time. This reduction in purchasing power can adversely affect individuals on fixed incomes, such as retirees.
• Uncertainty and Planning Challenges: High or unpredictable inflation can create uncertainty in the economy, making it challenging for businesses and individuals to plan for the future. Long-term investments and financial planning become more difficult in an inflationary environment.
• Redistribution of Income and Wealth: Inflation can lead to a redistribution of income and wealth. Debtors may benefit from inflation as the real value of their debts decreases, while creditors may suffer losses. Similarly, those with assets like real estate may experience increased wealth, while renters face higher housing costs.
• Interest Rate Adjustments: Central banks often respond to inflation by adjusting interest rates. Higher inflation may prompt central banks to raise interest rates to cool down the economy. This, in turn, affects borrowing costs, investment, and overall economic activity.

Mitigating Inflation:

• Monetary Policy: Central banks play a crucial role in controlling inflation through monetary policy. By adjusting interest rates, open market operations, and reserve requirements, central banks aim to influence the money supply and, consequently, inflation.
• Fiscal Policy: Governments can use fiscal policy tools, such as taxation and government spending, to manage inflation. Reducing government expenditures or increasing taxes can help cool down an overheated economy, while increased spending can stimulate economic activity during periods of low inflation.
• Supply-Side Policies: Addressing the root causes of inflation, such as supply-side constraints, is essential. Policies that focus on improving productivity, reducing production costs, and enhancing the efficiency of markets can help alleviate inflationary pressures.
• Wage and Price Controls: In extreme cases, governments may resort to implementing wage and price controls to directly manage inflation. However, these measures are often considered temporary and can have unintended consequences, such as creating shortages or distortions in the market.

Conclusion:

Inflation is a complex economic phenomenon with multifaceted causes and effects. While moderate inflation is a normal part of economic growth, policymakers must carefully manage it to avoid detrimental consequences. By implementing effective monetary and fiscal policies, addressing supply-side issues, and promoting stability, governments can strike a balance that fosters sustainable economic development while keeping inflation in check. A proactive and balanced approach is crucial to ensuring the well-being of individuals and the stability of economies in the face of inflationary pressures.

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Lesson of the Day: ‘Inflation Has Arrived. Here’s What You Need to Know.’

U.S. inflation is at a 40-year high. In this lesson, students will learn about why prices rise or fall over time and what it means for the nation.

By Jeremy Engle

Lesson Overview

Featured Article: “ Inflation Has Arrived. Here’s What You Need to Know. ” by Jeanna Smialek

Have you noticed any prices going up? Say for food, gas or rent? Or for things like bikes or burritos?

The Times reported on Jan. 12 that inflation , as tracked by the Consumer Price Index, is rising at its highest rate since 1982. But what exactly is inflation, what is causing prices to go up and why are many economists worried about its continued rise?

In this lesson, you will learn about inflation and what the current rise in prices means for you, your family and your community. In a Going Further activity, you will act as an economic adviser to President Biden and make a recommendation for how to best tackle the problem.

What do you know about inflation? What do you want to know?

Have you and your family talked about rising prices? Has the higher cost of things affected what you buy and whether you save money?

Part 1. Watch a video

Watch the two-minute video above by the BBC News explaining what inflation means and why it’s happening now in Britain. Then, in writing or through discussion with a partner, respond to the following prompts:

In your own words, what is inflation?

According to the video, what is one reason inflation is happening right now?

How does inflation affect consumers?

Part 2: Analyze and Interpret a Graph

Year-over-year percent change

in the Consumer Price Index

without food

Year-over-year percent change in the Consumer Price Index

Look closely at the graph above showing the year-over-year percent change in the Consumer Price Index — the annual change in prices for a basket of goods and services — in the United States since 1965. Then, respond to the following questions drawn from our What’s Going On in This Graph? feature:

What do you notice about the year-over-year percent change in prices over the past half century?

What do you wonder? What questions does the graph raise?

What’s going on in this graph? Create a catchy headline that captures its main idea.

Finally, make a prediction: Based on what you learned from both the video and the graph, do you think inflation will continue to rise? Or do you believe the increase is a temporary problem?

Questions for Writing and Discussion

Read the featured article , and then answer the following questions:

1. Ms. Smialek writes: “Inflation has become central to the American zeitgeist in 2021 in a way that it hadn’t been for decades.” Give two examples from the article that support her observation.

2. The article defines inflation as “a loss of purchasing power over time.” In your own words, what is inflation? Use some concrete examples from everyday life to make your definition understandable to a fourth grader. What is the Consumer Price Index?

3. Why is a little bit of consumer price inflation generally viewed as desirable, according to the article? What roles does the Federal Reserve, America’s central bank, play in keeping prices from increasing too rapidly?

4. What are typical causes of inflation? What does Ms. Smialek mean when she writes: “The inflationary burst America has experienced this year has been driven partly by quirks and partly by demand.” Give an example of each.

5. Economic forecasters are divided about the future of inflation in the United States. Give one example to support the idea that “the price burst will fade,” as Ms. Smialek writes, and one to support the view that there are “concerning signs that inflation is becoming stickier.”

6. How does inflation impact different groups and institutions, such as borrowers, lenders, workers, banks and the stock market? Why can inflation be particularly hard on lower income households, according to the article?

7. What new things did you learn about inflation by reading the article? What details, lines or statistics stand out? Return to your prediction in the warm-up activity? Do you think prices will continue to increase and perhaps become a permanent feature of the economy or is inflation a transitory phenomenon? What evidence in the article leads you to this conclusion?

Going Further

Option 1: Learn more about inflation and the state of the U.S. economy.

Inflation is high and has been for months. It’s weighing on consumer confidence, making Washington and policymakers nervous, and threatening to eat away at household paychecks well into 2022. What questions do you still have about inflation and the state of the U.S. economy? What else do you want to know?

You might begin by looking at The Times’s Economy topics page , or by reading one of the articles on inflation and its impacts below. Then, write or discuss with a partner: What is your reaction to the article? How did it add to or change your understanding of inflation? What was the most fascinating, provocative or memorable thing you learned? What questions do you still have about inflation?

The $1 Pizza Slice Becomes Inflation’s Latest Victim

How Much Are You Willing to Pay for a Burrito?

Only 17% of Workers Say Their Pay Has Kept Pace With Inflation.

Consumer Prices Rose at Fastest Pace Since 1982, Pressuring Washington

Millennials Confront High Inflation for the First Time

Worried About Inflation? Here’s What That May Reveal About You.

Expert Answers to Readers’ Questions About Inflation

Option 2: Interview a family member about the prices of goods when they were young.

One fun way to learn more about inflation is to talk to an elder. Ask a parent, grandparent or older family member or friend what prices were when they were children for at least three of the items on the list below:

A candy bar

A hamburger

A movie ticket

A gallon of gas

Make sure to write down both the estimated price of the good and the approximate year. Then, do some research, either by visiting local businesses or by hunting online, to find out what the price is now for the same good.

Next, after you have gathered the information about prices then and now, make some observations: What do you notice? What do you wonder? What does the information you’ve gathered tell you about inflation and the change in prices over time?

Afterward, share your findings with your class and plot the information on a rough timeline of prices.

Option 3: Make a recommendation.

Inflation in the United States is rising at its fastest rate so far this century. At 7 percent, according to one index, inflation is more than triple the Federal Reserve’s target . While much of what’s happening is related to the pandemic and surging demand as the nation struggles to return to something resembling normalcy, Republicans have latched onto the issue , blaming President Biden for the economic situation.

Imagine you are an economic adviser to Mr. Biden: How concerned should we as a nation be about inflation? What should the Biden administration do to address it?

For example, should the president recommend that the Federal Reserve raise interest rates? Should he consider price controls or cut government spending? Or would you counsel him not to worry because the economy is generally strong and the inflation is likely to be a temporary phenomenon?

To help formulate your recommendation, you might read one or more of the Times articles and Opinion essays below:

Who’s to Blame for Rising Prices

Rapid Inflation Fuels Debate Over What’s to Blame: Pandemic or Policy

Inflation Warning Signs Flash Red, Posing Challenge for Washington

Price Controls Set Off Heated Debate as History Gets a Second Look

The Perilous Politics of Rising Inflation (“The Daily” podcast)

History Says Don’t Panic About Inflation

We Need to Do Hard but Necessary Things to Tackle Inflation

Inflation Keeps Getting Worse. But Can the Fed Really Rein It In?

Want more Lessons of the Day? You can find them all here .

Jeremy Engle joined The Learning Network as a staff editor in 2018 after spending more than 20 years as a classroom humanities and documentary-making teacher, professional developer and curriculum designer working with students and teachers across the country. More about Jeremy Engle

122 Inflation Essay Topic Ideas & Examples

🏆 best inflation topic ideas & essay examples, 👍 good essay topics on inflation, ⭐ simple & easy inflation essay titles, 💡 interesting topics to write about inflation.

• Increasing Inflation Impact on Individuals In simpler terms, inflation is the rise in the cost of living due to an exaggerated increase in commodity prices. This is because the rate of savings will be lower than the inflation resulting in […]
• Problem of China’s Inflation With the increase in oil prices, energy costs have increased, and this has resulted into an increase in the prices of products manufactured in the industries. In 2009 the government made a policy to increase […] We will write a custom essay specifically for you by our professional experts 808 writers online Learn More
• Inflation and Deflation and Their Outcomes That is the money in the hands of the consumers is more causing an increase in the aggregate demand. On the other side, the lender of the money loses some value of the money given […]
• The Relationship Between Money Supply and Inflation It is evidenced that changing the money supply through the central banks leads to a control of the inflationary situations in the same economy.
• Inflation in the United Kingdom According to the Bank of England, inflation occurs when the demand exceeds the ability by the economy’s capacity to produce goods and services.
• Inflation and High-Interest Rates When a company borrows in a country with higher interest rates, the risk of inflation and currency depreciation grows, but the debt of this company is the same.
• The Price Deviations and Inflation Rates As seen from the table, the price deviations and inflation rates vary significantly depending on the item, season, and any global events that affect the economy.
• The Economic Disparity and Inflation It is essential to emphasize that the economic consequences of the pandemic are severe and are due in the main to inflation.
• US Economy: Navigating Debt, Inflation, and Recession Risks Today, the US is the world’s largest debtor and also the largest economy, market, and investor. Household debt can become a severe problem for the economy if exceeds their dead and accumulated wealth.
• Unemployment Rate: Impact on GDP and Inflation In such a way, the scenario shows it is vital to preserve the balance and avoid decisions focusing on only one aspect of the economy.
• The Inflation Dynamics in the Canadian Context According to the report, the economy only functions well when inflation is stable and predictable and is in an unhealthy state otherwise.inflation has been stable in the country over the last 25 years because of […]
• “Expected and Realized Inflation…” by Binder & Kamdar At the same time, the key focus of adaptive expectations is on the past rates of realized inflation and the factors that caused it.
• Inflation at the International Monetary Fund Anchoring inflation expectations, which is a condition in which inflation is regarded near the Central Bank target and typically matches what consumers anticipate, is one of the other possible measures. The pandemic appears to be […]
• How the Federal Reserve Controls Inflation According to the author of the article, the crisis became the impetus for developing new strategies for controlling the level of inflation.
• Inflation: Types and Negative Effects The mentioned type of inflation can stimulate the economy and increase demand for jobs, but at the same time, it raises the prices and is usually more expensive than cost-push inflation.
• Fiscal Policy and Inflation in Canada According to the report, in order to protect the country from the long-lasting consequences of the COVID-19 pandemic and the recently emerged effects of the Russian-Ukraine war, Canadian policy-makers implemented fiscal policies, but their efficacy […]
• Walmart Has Been Negatively Impacted by Inflation The employment issues caused by the pandemic and increased prices for goods handling forced the company to consider the option of automation for business processes.
• “Inflation Hits the Fastest Pace Since 1981, at 8.5% Through March” by Koeze Further on, the predictions reveal that the inflation rate is expected to stabilize due to a decrease in the price of used cars and apparel.
• Inflation Rates and the Value of the Dollar Projected Social Security benefits at the retirement age of 65 years are 48,580 The current age is 25 years Retirement age is 65 years =40 years The annual inflation rate is at 3% Utilizing the […]
• Inflation’s Impact on Fixed Income By taking a diversified approach to fixed income investing, investors can better manage the risks associated with interest rates as well as inflation and increase the yield in their bond portfolios.
• How Economic Crises Affect Inflation Beliefs A feature of the article is the study by the authors of the consequences of inflationary crises and comparison with pre-existing crises to calculate the level of the crisis as a whole.
• Inflation: What Is It and Inflation in the USA Inflation is an increase in the general price level of goods, works, and services of the country’s population and businesses or an extended period. This kind of inflation is considered the best because it occurs […]
• Inflation Crisis in China for Financial Managers As a financial manager running my company, the rise in prices of commodities will decrease the purchasing power of the foreign currency used by investors and potential customers across the globe.
• Unemployment and Inflation Relation However, the level of unemployment and its prevailing types can differ significantly depending on the state of the economies of countries and the policies they use to combat unemployment.
• Unanticipated and Participated Inflation The first inflation outcome refers to income recipients hurt by inflation as there is a forcible price level increase that does not coincide with their income increase proportionally.
• Interest Rate and Inflation Impact on Exchange Rate The second observation point to be made pertains to the differences in the exchange rate of NZDUSD among the two viable.
• Inflation and Deflation Effects on the US and Saudi Stock Markets Inflation is traditionally defined as a consistent rise in the price rates within a specific industry or in the entire economy of the state, which is triggered by a rapid increase in demand: “Inflation is […]
• Treasury Inflation-Protected Security Refers This ensures that the real rate of interest is determined beforehand, and it adjusts automatically to the increase in the inflation rate.
• Significance of Inflation to Corporate Finance The argument goes on that with elevated inflation rates, there is always a chance to cut down on interest rates as compared to instances when the inflation rates are low and interest rates need to […]
• UAE and GCC Economic Analysis: Inflation and Unemployment This is explained by the fact that UAE is less dependent on oil trade, hence, the inflation and unemployment rate in the UAE is lower in comparison with the countries of GCC.
• Government Spending Stimulation in the Fight Against Inflation The equilibrium point is a point where the value of is money adjusted thereby creating an equilibrium in the quantity of money supplied and that of the quantity of money demanded.
• How the Inflation Gauge Was Faulty in the Past In other words, the goal of the CPI, when prices change, is to measure the percentage change if the spending by the consumers to be as well off as they were before.
• Inflation in the US Business Industry Inflation can be measured in the following ways; Monetary inflation; caused by increase in the increase in the amount of money in circulation in an economy.
• How Should Monetary Authorities React to Higher Inflation Therefore, the best alternative for monetary authorities to react to higher inflation is to reduce its regulatory influence in private enterprises and banks and limit the amount of money supply in the country. Therefore, the […]
• Gasoline Prices, Rates of Unemployment, Inflation, and Economic Growth The data which has been queried from the database are related to gasoline prices in California, the unemployment rate in the US, the inflation rate in the US, and Real GDP.
• Federal Reserve System: Inflation The article ‘Inflation and the Federal Reserve’ by Richard Cook; this source can be used to describe the central threat of inflation and identify the principal steps to be developed by central banks, government, and […]
• The US and the Philippines: Unemployment and Inflation In cyclical terms, this rising inflation is actually the product and not the cause of these record-high oil prices and the idea that the U.S.had failed to think of the above-discussed alternatives to the energy […]
• Interest Rate and Inflation in Netherlands As interest rate rises, demand for debt falls as cost of capital will increase and growth rate declined. As, more funds is shifting to Market B, central bank may raise the bank rate to stabilise […]
• Monetary Policy in an Economy: Inflation Inflation can be defined as a persistent rise in the general level of prices or alternatively, a persistent fall in the value of money.
• Dollarization the Main Tool to Reduce Inflation In general, wouldollarization’ means the substitution of hard currency for the domestic currency as the medium of exchange, and above all as the store of value, in a large part of the domestic economy, so […]
• Inflation Targeting in Emerging Countries Inflation Targeting is the public announcement of numerical targets for inflation for the year. Some emerging market countries that engage in inflation targeting have gone too far in the limitation of exchange rate flexibility, with […]
• Future Inflation and Growth Figures The increase in real GDP in the first half of 2007 was the same as that in the second half of 2006: at an annual rate of 2.25%.
• “Inflation Rise Hits US Consumers” BBC Article The main focus of the article’s concern is the inflation rise that US economics experiences now and the impact it has on US consumer spending.
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• The Federal Reserve and the Inflation Problem Louis in 2005, it was noted that the economic hero of the inflationary decades was the then chairman of the Fed, Paul Volcker.
• Economics and the Great Inflation in US and Japan In the 1990s and the early years of the 21st century, the federal reserve policy makers opted to adopt the mop-up-after strategy-policy of letting the bubbles burst and then mopping up there after.
• Inflation Tradeoffs and the Phillips Curve In the findings, Lucas concluded that the there is a direct relationship and variance in the tradeoff between full employment and inflation rate at a particular level of input in the countries studied.
• Inflation and Unemployment in the United States In the 21st century, there are so many issues in the economy of the United States. This is increasing the demand for skilled workers by the day as opposed to the unskilled.
• Unemployment and Inflation Issues In most cases, if one is suffering structural unemployment, it is as a result of improvement in a certain area, or a change in the way things are done.
• Fluctuations in Inflation and Employment Debate surrounded what is termed the multiplier effect: are they higher for tax cuts or government spending, the differences in multiplier effect from different tax cuts, Incentive impact from tax cuts.
• Inflation in the 1970s In such a case, the reduced injections into the circular flow of the economy trim down the demand, which reduces inflation, and the general growth of the economy reduces significantly.
• Inflation Causes: Structuralism and Monetarism One of the features of this kind of inflation is a rapid rise in the price level with the currency loosing its value.
• The Effects of Inflation Targeting In theory inflation targeting is straightforward: the impending rate of inflation is predicted by the central bank, later on it is juxtaposed with the target rates which the government considers as appropriate for the economy […]
• The Euro Zone’s Rising Inflation and Unemployment Rate However, the euro zone found itself in a predicament from late 2009 after the economic downturns that faced some countries in the euro zone.
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English for Economists

Inflation | english lesson.

Apr 13, 2022

Hello and welcome. My name is Alan Robert, and today is April 12th, 2022.   Our English vocabulary selection today has to do with inflation. We’ve touched upon inflation in recent previous podcasts when we have looked at the tendency of central banks to raise their policy rates , and the high prices of soft commodities like wheat and canola, due to war in Ukraine and drought in Canada , as well as problems in the global supply chain . If you missed those lessons, I encourage you to go back and listen to them.

Since inflation is shaping up to be one of the big stories of this year as many large and small economies are already feeling the effects of surging prices, I thought we could take a deeper look at some of the technical vocabulary you might need in order to discuss the issue yourself.

Okay. Let’s get started with the vocabulary. Knowing how to use at least a few of these words will help you talk about inflation in English.

• CPI: These initials stand for the Consumer Price Index, which is a measure of the average change over time in the prices paid by consumers for a market basket of goods and services.
• Hawk: An inflation hawk is someone seen as willing to allow interest rates to rise in order to keep inflation under control.
• Inventory: Inventory can refer to raw materials used in a manufacturing process, or it can mean the accumulation of finished goods… also known as stock.
• Creeping inflation: This is mild inflation, usually understood to be less than 3% per year. Creeping means that it is increasing, but slowly.
• Walking inflation: Inflation between 3% and 10% per year. This level of inflation is considered harmful.
• Galloping inflation: a condition when the inflation rate is extraordinarily high. It is perhaps 20%, 50%, or even higher on an annual basis.
• Hyperinflation: This is when inflation gets out of control. You might see monthly increases of more than 50%.
• Demand-pull Inflation: Demand-pull inflation is the upward pressure on prices that follows a shortage in supply, a condition that economists describe as “too many dollars chasing too few goods.”
• Cost-push Inflation: Cost-push inflation (also known as wage-push inflation) occurs when overall prices increase due to increases in the cost of wages and raw materials.
• Built-in Inflation: Built-in inflation occurs when workers demand higher wages to keep up with rising living costs. This causes businesses to raise their prices in order to offset their rising wage costs, leading to a loop of wage and price increases.  Built-in inflation is sometimes referred to as a “wage-price spiral”.
• Pent-up demand: A rapid increase in demand for a service or product after a period of reduced spending which resulted in a backlog of demand.

Okay, listen up. You will hear some, but not all of the vocabulary, used in this short summary:

It’s not quite a global phenomenon, since some countries – particularly in Asia — are only experiencing creeping inflation this year, but other major economies, like the United States, have entered the harmful range of walking inflation, with inflationary figures higher than they have been in the past 40 years.

This historical spike in inflation has been driven by supply chain disruptions and pent-up consumer demand for goods following the reopening of the economy in 2021.  This situation has been complicated by the Russian invasion of Ukraine, which led to a surge in the price of oil and wheat.

Consumers can feel the spike in oil prices at the gas pump, and they feel the soaring wheat prices at the grocery store.

Complicating matters even more, countries are also experiencing cost-push inflation caused by the current high prices of many raw materials, like copper for example.

Most analysts expect central banks to apply hawkish policy measures, which will feature increases in policy rates designed to make credit more expensive and hopefully bring inflation down to its normal range.

Thank you for joining me on today’s lesson. If you’d like to connect with me, feel free to shoot me a message here . Until next time!

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Essay on Inflation in Pakistan for Students

by Pakiology | Apr 21, 2024 | Essay | 0 comments

In this essay on inflation in Pakistan, we will look at the causes, effects, and solutions to this issue that has been affecting the country for decades. The term ‘inflation’ refers to a sustained rise in the prices of goods and services in an economy. In Pakistan, inflation has been a major concern since the late 1990s, with the Consumer Price Index (CPI) reaching a peak in 2023. We will explore the various factors that have contributed to inflation in Pakistan, its economic effects, and what can be done to address the issue.

Page Contents

Essay on Inflation Outlines

Causes of inflation in pakistan, effects of inflation, solution to control inflation.

• Introduction

Inflation in Pakistan is caused by several factors, which can be divided into two main categories: domestic and external. The main domestic causes of inflation are an increase in money supply, an increase in government spending, an increase in indirect taxes, and a decrease in economic growth.

The most significant contributor to inflation in Pakistan is an increase in the money supply. When there is too much money chasing after too few goods, prices rise, creating a situation known as demand-pull inflation. An increase in the money supply can be caused by the central bank printing more money or by the government borrowing more money from the public.

In addition, higher government spending can lead to inflation. This occurs when the government prints more money to finance its expenditure or borrows from the public and transfers the cost of this additional spending to businesses and consumers. This leads to higher prices for goods and services. Indirect taxes are another major factor that contributes to inflation in Pakistan. When indirect taxes are increased, prices of goods and services also increase, leading to an overall rise in prices.

Finally, low economic growth can also cause inflation in Pakistan. A weak economy reduces people’s purchasing power, forcing them to buy less, which reduces demand and leads to lower prices. However, when economic growth stalls, businesses are unable to sell their products at the same price as before, leading to a rise in prices.

Overall, inflation in Pakistan is caused by a combination of domestic and external factors. These include an increase in money supply, higher government spending, increases in indirect taxes, and a decrease in economic growth.

The effects of inflation on the economy can be both positive and negative. Inflation erodes the purchasing power of money, meaning that each unit of currency is worth less than it was before. This means that, as the cost of living increases, people can purchase fewer goods and services for the same amount of money. As a result, their standard of living decreases.

Inflation also reduces the real return on investments and savings, which can have a detrimental effect on economic growth. When inflation is high, people prefer to save their money rather than invest in a business or other activities. This reduces the availability of capital and results in slower economic growth.

In addition to decreasing standards of living, inflation can lead to unemployment if companies are not able to increase wages at the same rate as prices rise. This can lead to an increase in poverty, as people struggle to afford necessities. Furthermore, when prices rise faster than wages, it puts pressure on government budgets and can increase public debt.

Inflation can also cause the value of the local currency to depreciate against foreign currencies. This has a direct impact on the cost of imports and makes domestic goods less competitive in international markets. It can also have an indirect impact on exports, as it reduces the competitiveness of local producers in foreign markets.

Inflation is a serious issue in Pakistan, and it needs to be addressed to improve the country’s economic conditions. The following are some of the measures that can be taken to control inflation in Pakistan:

1. Fiscal policy: A strong fiscal policy is necessary for controlling inflation. The government should increase its revenue by implementing taxes on the wealthy and reducing public spending. This will help reduce budget deficits, which will result in lower inflation.

2. Monetary policy: The State Bank of Pakistan should adopt a tighter monetary policy to control inflation. It should raise interest rates so that investors have an incentive to save rather than spend, thus curbing demand-pull inflation.

3. Supply-side measures: There should be an increase in the production of essential commodities and products to meet the demand of consumers. This will help reduce prices and inflation in the long run.

4. Subsidies: The government should provide subsidies to those who are suffering due to the high prices of essential items. This will help them cope with the rising cost of living and ensure that they have access to essential goods and services.

5. Stabilizing exchange rate: A stable exchange rate between foreign currencies and the rupee is necessary for controlling inflation. The State Bank of Pakistan should strive to keep the rupee’s value stable by using currency swaps and other methods.

These measures can go a long way in controlling inflation in Pakistan. By taking these measures, the government can help improve the country’s economic condition and create an environment conducive to investment and growth.

What is inflation in simple words?

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

What are the 4 main causes of inflation?

The 4 main causes of inflation are: Demand-pull inflation: when there is an increase in demand for goods and services that outstrip the economy’s ability to produce them. Cost-push inflation: when the cost of production increases, causing companies to raise prices to maintain their profit margins. Built-in inflation: when businesses expect prices to rise and build that expectation into their prices, causing a self-fulfilling cycle of inflation. Imported inflation: when the cost of imported goods increases, leading to higher prices for consumers.

What are the 5 main causes of inflation?

The 4 main causes of inflation are: 1. Demand-pull inflation 2. Cost-push inflation 3. Built-in inflation 4. Imported inflation 5. Monetary inflation

What is inflation introduction?

Inflation is a phenomenon that has been observed throughout history. It refers to the sustained increase in the general price level of goods and services in an economy over a period of time.

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Essay on Inflation In Philippines

Students are often asked to write an essay on Inflation In Philippines in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Inflation In Philippines

What is inflation.

Inflation means the prices of things we buy are going up. In the Philippines, when prices rise, it becomes harder for people to afford food, clothes, and other items. This can happen when there’s too much money to spend but not enough goods, or when the cost to make products goes higher.

Inflation in the Philippines

The Philippines often experiences inflation. This can be due to natural disasters affecting crops, changes in global oil prices, or government actions. When inflation occurs, Filipino families might struggle to buy what they need, which can be tough for everyone.

Effects on Daily Life

Because of inflation, families in the Philippines might have to change how they spend money. They may buy less food or cheaper items to save money. Sometimes, even going to school or getting healthcare can become more expensive, making life challenging for many people.

250 Words Essay on Inflation In Philippines

Understanding inflation in the philippines.

Inflation means the increase in prices of things we buy, like food, clothes, and toys. In the Philippines, just like in other countries, prices can go up over time. This can make life hard for families, especially if they don’t have a lot of money.

Causes of Inflation

In the Philippines, inflation can happen for many reasons. Sometimes, if there’s a problem with growing food or if there’s a big storm, there might not be enough of it, and this can make prices go up. Also, if the money in the Philippines becomes less valuable compared to other countries’ money, things that come from other countries can become more expensive.

Effects of Inflation

When prices go up, it’s tough for people. They might not be able to buy as much with their money, and this can be stressful. Parents might have to work more to earn more money, and sometimes, kids might not get new toys or clothes as often.

What the Government Does

The government in the Philippines tries to control inflation. They can change how much money is in the economy or make rules about prices to help keep them from going up too fast. They do this because they want to make sure that people can afford what they need.

Inflation in the Philippines is a challenge that affects everyone. It’s important to understand why it happens and how it changes the way people live. While it can be tough when prices go up, the government works to manage inflation for the good of the country.

500 Words Essay on Inflation In Philippines

Inflation is when the prices of things we buy go up. Imagine you could buy a toy car for one peso last year, but this year the same car costs two pesos. That’s inflation: the money you have buys less than before. This can happen with toys, food, clothes, and almost everything. In the Philippines, like in many countries, inflation affects how people live because they need more money to buy the same things.

Causes of Inflation in the Philippines

In the Philippines, inflation happens for a few reasons. Sometimes, when there are not enough goods like rice or vegetables, prices go up because many people want these items but there aren’t enough for everyone. This is called “demand-pull inflation.” Another reason is “cost-push inflation,” which is when the cost to make products goes up. For example, if the price of gas increases, it costs more to deliver goods to stores, so the prices of these goods go up.

Also, when the money value in the Philippines goes down compared to other countries’ money, things we buy from other countries become more expensive. This is known as “imported inflation.”

Effects of Inflation on People

Inflation can make life hard for families. Parents have to spend more money on the same things, so they might have less money left for saving or for fun activities. Kids might notice that their allowance doesn’t buy as much candy or toys as it used to. If inflation is high, people might worry about prices going up even more and rush to buy things, which can make inflation worse.

How the Government Handles Inflation

The government of the Philippines tries to control inflation to make sure prices don’t rise too fast. The Central Bank of the Philippines can change interest rates, which is like changing the cost of borrowing money. If it’s more expensive to borrow money, people and businesses might spend less, and this can help slow down inflation.

The government can also use policies to help make sure there is enough supply of goods. For example, they can encourage farmers to grow more rice or make it easier for stores to get products from other countries when there’s not enough supply in the Philippines.

What Can People Do?

People can also do things to handle inflation. Families can plan their spending and look for better prices before buying something. It’s important to learn about money and how to use it wisely, especially when prices are going up.

Inflation in the Philippines is when prices rise and money buys less. It can be caused by not enough goods, higher costs to make products, or the country’s money value changing. Inflation affects how people live, but the government and people can take steps to manage it. By understanding what inflation is and how it works, even school students can be better prepared to deal with it in their daily lives.

That’s it! I hope the essay helped you.

If you’re looking for more, here are essays on other interesting topics:

• Essay on Cold War
• Essay on Cold Weather
• Essay on Inequality In Society

Apart from these, you can look at all the essays by clicking here .

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Essay on Inflation in English | The CHSE Student

Essay on inflation in 250 words, introduction.

Inflation is the rate at which the prices of goods and services increase over time. It is measured as a percentage change in the Consumer Price Index (CPI), which is a basket of goods and services that are commonly purchased by households.

What causes inflation?

There are many factors that can cause inflation, including:

Increased demand

If demand for goods and services increases faster than the supply, prices will rise. This can happen when the economy is growing rapidly or when there is a sudden increase in demand, such as during a natural disaster.

Increased costs

If the cost of producing goods and services increases, prices will also rise. This can happen when there is a shortage of raw materials, when wages increase, or when taxes are raised.

Deflation is the opposite of inflation. It occurs when prices are falling. Deflation can be caused by a number of factors, including a recession or a decrease in the money supply.

How does inflation affect people?

Inflation can have a significant impact on people's lives. It can make it more expensive to buy goods and services, which can reduce people's purchasing power. Inflation can also make it difficult to save money, as the value of savings will decrease over time.

How to cope with inflation?

There are a few things that people can do to cope with inflation:

Adjust their spending habits

People may need to adjust their spending habits to accommodate rising prices. This may mean cutting back on unnecessary expenses or finding ways to save money.

Invest in assets that are not affected by inflation

This could include investing in real estate, gold, or other commodities.

Take advantage of inflation-indexed investments

These investments are designed to protect your purchasing power against inflation.

Inflation is a complex issue with no easy solutions. However, by understanding the causes of inflation and how it affects people, we can take steps to protect ourselves from its negative effects.

Essay on Inflation in 500 words

Government policies.

Governments can also cause inflation by printing too much money. This can lead to a decrease in the value of the currency, which makes goods and services more expensive.

Speculation

Speculation is when people buy goods or assets in the hope of selling them at a higher price later. This can also drive up prices, as it creates more demand for goods and services.

Inflation can also lead to social unrest, as people become frustrated with the rising cost of living. It can also lead to a decrease in investment, as businesses become more uncertain about the future.

Negotiate for higher wages

If you are employed, you may be able to negotiate for higher wages to offset the effects of inflation.

Ask for a raise

If you are self-employed, you may be able to raise your prices to offset the effects of inflation.

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English Essay on “Inflation in India” Complete Essay, Paragraph, Speech for Class 10, 12 Students.

Inflation in India

Inflation as an economic phenomenon may be described as the continuous upward spiral of prices in all parts of the economy. This can be described as a boost to the economy, but, if it is not properly handled we may be burdened with rising prices which may prove detrimental to economic growth. The economic situation in a country can be analyzed under the following heads of production and distribution.

When we talk of production we are considering the fields of agriculture and industry. In the agricultural arena, the production process involves all farmer’s activities in the fields together with the working of co-operatives for providing of facilities like better seeds, fertilizers, etc, and last but not the least the facility of proper marketing by the cooperatives to enable the farmer to get the return for his labor which should be reasonable enough an amount for him to be able to look after his domestic needs and responsibilities.

This is desirable to enable the Indian farmer to progress. This seems to be quite logical and simple, but does it really benefit the farmer, how does it aggravate or remedy the process of inflation. In its effort to help the farmer, the Government buys the grain from him, and we have huge warehouses stacked with grain which is expected to feed the Public Distribution System. For this, experience has shown that the lengthy distribution system has often resulted in a lot of wastage of food grains, whiles the Government on its part, is trying to fix a high price for the farmer’s grain and send food for the common man. Here again, prices are fixed by the Government and steadily keep increasing resulting in aggravation of the inflationary process. If the farmers are provided facilities of better seeds, implements, and marketing facilities, production would improve and the market forces of supply and demand would automatically fix appropriate prices.

In the same way, in the industrial sector, also, the Government can help to finance Projects which are found to be socially and economically beneficial, and there are fewer loans not paid back to banks. Thus even in the industrial sector, it is important to have the national interest uppermost in the minds of the authorities. It is not uncommon to see large Projects worth crores of rupees going halfway and then being abandoned. If it was not a useful Project for the Nation, why was it ever started, and colossal sums of money were wasted on it? The same trend has aggravated the upward spiral of the ogre of inflation, ever since the advent of industrialization in free India. —

In politically independent India, we have seen great industrialists like the Tatas and the Birlas who have without fail combined industrial progress with rational utilization of their profits for the benefits of the people. We can be sure that, if their examples were followed for our guidance all the help in the form of Capital goods and money loans from the IMF and the World Bank would, in the span of half a century see India at a much better economic position than we are in, today. As the number of rules and regulations increase there is less participation of market forces and prices continue to be fixed at higher and higher levels, with each passing year. Unless we learn to spread out our gains over a large number of people the inflationary trend will continue to be fuelled.

Every time we have the national budget raising any petrol or diesel prices, we see gradually all prices receive an impetus to rise, and inflationary trend just continues unabated. Hence, in the industrial sphere also see how artificial fixation of prices leads to further inflation.

In India, the importance of small-scale industries cannot be ignored. In this area also we see that though, co-operatives are prominent and do a lot of good to the village artisan, but, once again, the marketing which is done by the co-operative, it is of great benefit but, once again the worker still does not get a proper ‘share of the gains. The artificial fixation of prices in no manner ensures the gain for the workers because of the inflationary trend fuelled by the fixation of prices rather than the sharing of profits by a larger number of people.

In essence, we have seen that, though India has progressed with the passage of time, this progress made does not compare favorably with other countries like Japan who managed to bounce back on the International Economic scene. Inflationary trends are essential when we have just started to invest in capital goods from foreign markets, and are just building up the infrastructure of roads, railways, and dams, etc. but that phase soon after a few decades should get over when the industry starts using their machines to the optimum capacity, and the transport system facilitates trading activity even to the remotest part of the country, and the poverty line includes lesser people with each passing day.

It would be very unfair to say that, nothing has been done but, it definitely needs correction as far as large resources of the country stand blocked in the form of ‘Black Money. The gap of this unaccounted money is becoming tighter and tighter on the economy. The result of all this being that, we have innumerable houses lying vacant, and myriads of people without houses, we have plenty of students needing admission to schools and plenty of trained teachers, but there is a paucity of schools why? This all happens when we have unaccounted money and we cannot do much with it except pay high prices and this class of money further fuels inflation. This is the fertile soil for all corruption, which erodes the economy still further.

At the individual level also as citizens of India we can help in curbing this process for example when we buy anything do we insist on taking a receipt for it? I daresay most of us do not because, not taking a receipt helps the shopkeeper to save his income tax, and the customer saves the sales tax. Hence the system is today flourishing because each one of us, yes, each one of us is contributing to the very existence of ‘Black Money’ and this, in turn, restricts the spread of benefits of progress to the poorer classes, hence a major part of the Indian population continues to live in abject poverty, with a total lack of facilities, education, and have, hardly any chances of progress. Prices must come down by the play of market forces and not in the form of depression leading to an increase in unemployment and poverty.

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