Category: Money tips Release Date: 2006-06-13
Inflation refers to the issue of banknotes in circulation of commodities in excess of the amount of money needed to currency depreciation caused by the price rise situation. Inflation is under the condition of notes in circulation as a unique socio-economic phenomenon.
Reason: paper money is a pure currency symbols, no value, but instead of metallic money the implementation of means of circulation functions; circulation of banknotes in circulation should be required to limit the amount of metallic money, if the circulation of banknotes in circulation exceeds the needs of the amount of metallic currency, paper money will be devalued, and prices should rise. Therefore, the excessive note issue due to currency devaluation, price increases, contributed to the direct cause of inflation.
Features: �excessive note issue due to a sharp depreciation. In the circulation of metal required in the amount of money has been set circumstances, the note issue more units of paper money can represent the less the amount of metallic money, the greater the degree of the depreciation of paper money. The extent that the devaluation of paper money note the formula for calculating the depreciation rate is: paper money depreciation rate = (1 -) × 100%, for example, a country needs a certain period of circulation of metal currency amount is 100 billion, the actual issue of notes is 200 billion, the depreciation rate notes
�prices due to devaluation of currency notes and all-round increase. Note the higher depreciation rate, the higher the rate of price increases, the formula for calculating the rate of price increases are: inflation rate = (-1) × 100%, for example, a country needs a certain period of circulation of metal currency amount of 100 billion, the actual notes issued 200 billion yuan, price inflation = (-1) × 100% = 100%.
Type: â‘?demand-pull inflation. The excessive growth of aggregate demand exceeds the current price level of goods under the aggregate supply, causing the prices generally rose. The excessive growth of aggregate demand reflected expansion in investment and consumption, caused by the continued expansion of money supply exceeded the growth in the availability of commodities, also known as excess demand and therefore inflation. â‘?cost-push inflation. Because of escalating costs caused by the general rise in prices. First, the factors leading to rising costs and material consumption increased by more than two of the wages of labor productivity growth. â‘?structural inflation. Socio-economic sectors due to structural imbalances caused prices generally rose. This type of inflation in general is more prominent in the developing world. Manifested mainly three kinds of situations: first, some domestic sectors, and even some bulk too much demand for key products in short supply, causing prices to spike, and only up not down, and then spread to other parts of product prices, so that the general price level continued to rise; the second is the uneven development of various sectors of labor productivity, leading to increased labor productivity to sectors with fast money wage growth, other sectors will follow the money wage increase, causing price increases, so that the general level of general price rose; 3 is an open sectors of the economy price, subject to international market prices tend to increase the level of impact, it will spread to non-open sectors of the economy, resulting in the general price level increases. â‘?imported inflation. Since the importation of goods prices caused domestic prices generally rose. This type usually appears in the case of global inflation, and through international trade, multinational corporations, and the open sector of the economy of means in the international media. â‘?inhibition of inflation. Exist in the market total supply is less than total demand, or structural imbalance between supply and demand situation, the state by controlling prices and commodity rationing approach, a mandatory curb the overall price level stability, which is a fact exists, However, the phenomenon of inflation did not occur.
Consequences: from a different point of view, inflation on a country's national economic development impact: â‘?on economic development. Inflation, price rises, so that the price signal distortion, easy to make the producers being diverted to the production astray, lead to the production of the blind development, resulting in the non-normal development of the national economy, so that the industrial structure and economic structure of deformed, leading to the whole national economy imbalance. When the inflation caused by the deformity of the economic structure needs correction, the State is bound to take various measures to curb inflation, the results will lead to a sharp drop in production and construction, faced with economic decline, therefore, inflation is not conducive to the economy stable and coordinated development. â‘?on income distribution. Inflation, currency depreciation, so that some lower income residents of the declining standard of living, so difficult to raise the general living standards. When inflation continued to occur, it may lead to social unrest and disharmony. â‘?on the impact of external economic relations. Inflation will reduce the export competitiveness of domestic products, causing an outflow of gold reserves, so that exchange rate depreciation.
Measures to curb inflation: Western countries to fight against inflation, deflation is generally the main measures and income policies. Deflation is withdrawn from circulation from circulation as part of too many notes, commonly used approach is: â‘?increase revenue. â‘?raise the discount rate and reduce the total amount of credit. By these means inhibited the total demand, so close to the total supply, to curb inflation. Revenue policy is mainly by limiting wages and prices rise to curb inflation, the approach is mainly: â‘?promulgation of the price guide lines. â‘?The tax cuts and other measures to stimulate enterprises cheap. â‘?on wages, prices, introduction of a mandatory control or management. In the West the country's economic development process, the adoption of these measures, to a certain extent, curbed inflation; However, due to the capitalist countries have taken measures not intended to inhibit or eliminate the root of inflation, but simply put it as a right inflation and the implementation of state monopoly capitalism as a means of regulation; so, the result not only can not really suppress or eliminate inflation, but instead further exacerbated inflation.
