Inflation is defined as a sustained, inordinate and general increase in prices. The Consumer Price Index is used to measure changes in the general price level from base year to current year. The internal value of money is determined by its purchasing power. An increase in the general price level implies a fall in the internal value of money and the occurrence of inflation. There are three degrees of inflation- creeping inflation whereby inflation proceeds for a long time at a moderate and fairly steady pace; galloping inflation whereby inflation proceeds at a very high rate and stagflation whereby the level of national income and output remain stagnant while the general price level increases.
Every government should be concerned with inflationary pressure because of the internal and external effects of inflation. At the micro level, inflation will bring about redistributive and output/production effects. For the fixed income earners such as pensioners, wage earners and salaried......
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