The Truth About Inflation

Inflation is experienced when the demand for goods and services in an economic system is greater than their supply. Whenever the supply is drastically reduced, the costs of such goods and services would likely escalate, ultimately causing an inflation. Some notable causes are the following:

• When the real estate industries increase their property value, so as to increase their earnings.

• If there is an increase in the income of the people, it can result in an increased demand, which consequently lead to inflation.

• When there is a rise in the buying price of the goods and services manufactured by a specific industry. For example, rise in the cost of oil can result in the increase of the air fares and transportation fares.

• Fiscal inflation is experienced when there is an excessive spending by the government.

• A hyperinflation takes place in the course of a war, or soon after it is over. This is usually short-lived and is also known as a galloping inflation.

• It also occurs when an economic system deals with high unemployment rate and stagnation.

While inflation is not necessarily the culprit, it affects us in various ways. It also takes place during the time of economic depression, recession and financial meltdown. As usual, the best way to deal with it is by preparing through savings.

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