conclusion for inflation essay

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.

ADVERTISEMENTS:

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:

• “ Investing in productivity growth ,” March 27, 2024, Jan Mischke , Chris Bradley , Marc Canal, Olivia White , Sven Smit , and Denitsa Georgieva
• “ 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?

Related articles.

What is supply chain?

How business operations can respond to price increases: A CEO guide

Five ways to ADAPT pricing to inflation

Economic essays on inflation

• Definition – Inflation – Inflation is a sustained rise in the cost of living and average price level.
• Causes Inflation – Inflation is caused by excess demand in the economy, a rise in costs of production, rapid growth in the money supply.

• Costs of Inflation – Inflation causes decline in value of savings, uncertainty, confusion and can lead to lower investment.

• Problems measuring inflation – why it can be hard to measure inflation with changing goods.
• Different types of inflation – cost-push inflation, demand-pull inflation, wage-price spiral,
• How to solve inflation . Policies to reduce inflation, including monetary policy, fiscal policy and supply-side policies.
• Trade off between inflation and unemployment . Is there a trade-off between the two, as Phillips Curve suggests?
• The relationship between inflation and the exchange rate – Why high inflation can lead to a depreciation in the exchange rate.
• What should the inflation target be? – Why do government typically target inflation of 2%
• Deflation – why falling prices can lead to negative economic growth.
• Monetarist Theory – Monetarist theory of inflation emphasises the role of the money supply.
• Criticisms of Monetarism – A look at whether the monetarist theory holds up to real-world scenarios.
• Money Supply   – What the money supply is.
• Can we have economic growth without inflation?
• Predicting inflation
• Link between inflation and interest rates
• Should low inflation be the primary macroeconomic objective?

See also notes on Unemployment

• Investing 101
• The 4 Best S&P 500 Index Funds
• World's Top 20 Economies
• Stock Basics Tutorial
• Options Basics Tutorial
• Economics Basics
• Mutual Funds
• Bonds/Fixed Income
• Commodities
• Company News
• Market/Economy News
• Apple (AAPL)
• Tesla (TSLA)
• Amazon (AMZN)
• Facebook (FB)
• Netflix (NFLX)
• Create an Account
• Join a Game
• Create a Game
• Budgeting/Saving
• Small Business
• Wealth Management
• Broker Reviews
• Charles Schwab Review
• E*TRADE Review
• Robinhood Review
• Advisor Insights
• Investopedia 100
• Join Advisor Insights
• Your Practice
• Investing for Beginners
• Become a Day Trader
• Trading for Beginners
• Technical Analysis
• All Courses
• Trading Courses
• Investing Courses
• Financial Professional Courses
• Advisor Login
• Newsletters

Inflation: Conclusion

After reading this tutorial, you should have some insight into inflation and its effects. For starters, you now know that inflation isn't intrinsically good or bad. Like so many things in life, the impact of inflation depends on your personal situation.

Some points to remember:

• Inflation is a sustained increase in the general level of prices for goods and services.
• When inflation goes up, there is a decline in the value, or purchasing power of money.
• Variations on inflation include disinflation ​, deflation , hyperinflation and stagflation .
• Theories as to the cause of inflation are up for debate. Some common theories include demand-pull inflation , cost-push inflation , and monetary inflation.
• When there is unanticipated inflation, creditors lose, people on a fixed-income lose, menu costs go up, uncertainty reduces spending and exporters aren't as competitive.
• Lack of inflation (or deflation) is not necessarily a good thing and can lead to destabilizing deflationary spirals.
• Inflation is measured with a price index.
• The two main groups of price indexes that measure inflation are the Consumer Price Index and the Producer Price Indexes . The GDP- and Price-deflator are also used.
• Interest rates are decided in the U.S. by the Federal Reserve . Inflation plays a large role in the Fed's decisions regarding interest rates since it uses inflation-targeting as a policy.
• In the long term, stocks and precious metals are good protection against inflation.
• Inflation is a serious problem for fixed income investors. It's important to understand the difference between nominal interest rates and real interest rates.
• Inflation-indexed securities offer protection against inflation but offer low returns.

Inflation's Impact on Stock Returns

How Inflation Affects Your Cash Savings

Coping With Inflation Risk

Should You Worry About the U.S Inflation rate?

The Importance Of Inflation And GDP

Maximize Your Real Rate of Return for Retirement

Home — Essay Samples — Economics — Inflation — The Rise of Inflation Rate in the Us

The Rise of Inflation Rate in The Us

• Categories: American Government Economic Growth Inflation

About this sample

Words: 1605 |

Published: Jul 15, 2020

Words: 1605 | Pages: 4 | 9 min read

Table of contents

Introduction, financial measures in the us government's inflationary rise, recommedation, what are some factors that contribute to the rise in inflation, how did the inflation affect the market, implementation of additional monetary easing (so-called qe 3), purchase policies of mbs newly decided at fomc in september.

Cite this Essay

Let us write you an essay from scratch

• 450+ experts on 30 subjects ready to help
• Custom essay delivered in as few as 3 hours

Get high-quality help

Verified writer

• Expert in: Government & Politics Economics

+ 120 experts online

By clicking “Check Writers’ Offers”, you agree to our terms of service and privacy policy . We’ll occasionally send you promo and account related email

No need to pay just yet!

Related Essays

1 pages / 555 words

2 pages / 1127 words

2 pages / 1193 words

2 pages / 1291 words

Remember! This is just a sample.

You can get your custom paper by one of our expert writers.

121 writers online

Still can’t find what you need?

Browse our vast selection of original essay samples, each expertly formatted and styled

Related Essays on Inflation

Theories of inflation in economics encompass a diverse range of perspectives that seek to explain the complex phenomenon of sustained increases in the general price level of goods and services. Inflation is a critical economic [...]

Nowadays, economic policies enacted by the United States have reverberated across the global stage, influencing international trade dynamics and shaping the trajectory of the world economy. One such policy that has garnered [...]

In recent times, the discussion surrounding inflation and its impact on the economy has gained significant traction. One proposed solution to address rising inflation levels is the implementation of the Inflation Reduction Act. [...]

Fuel prices are a topic of perennial concern and discussion, as they have far-reaching implications for individuals, businesses, and economies worldwide. This essay delves into the complex subject of fuel prices, examining the [...]

The occurrence of grade inflation is affecting the quality of education throughout the system. A lot of students, at every level of education, are promoted to higher grades even though they are unqualified for that grade. Grade [...]

In 1991 the Colombian authorities implemented inflation target for the first time, at the time the central bank (Banco de la Republican, BR) and the government were not clear about their tasks on macroeconomic management and [...]

Related Topics

By clicking “Send”, you agree to our Terms of service and Privacy statement . We will occasionally send you account related emails.

Where do you want us to send this sample?

By clicking “Continue”, you agree to our terms of service and privacy policy.

Be careful. This essay is not unique

This essay was donated by a student and is likely to have been used and submitted before

Download this Sample

Free samples may contain mistakes and not unique parts

Sorry, we could not paraphrase this essay. Our professional writers can rewrite it and get you a unique paper.

Please check your inbox.

We can write you a custom essay that will follow your exact instructions and meet the deadlines. Let's fix your grades together!

Get Your Personalized Essay in 3 Hours or Less!

We use cookies to personalyze your web-site experience. By continuing we’ll assume you board with our cookie policy .

• Instructions Followed To The Letter
• Deadlines Met At Every Stage
• Unique And Plagiarism Free

Inflation Essay Examples and Topics

Increasing inflation impact on individuals, problem of china’s inflation.

• Words: 2174

Impact of Zimbabwe’s Monetary Policy on Its Economy

• Words: 3271

Inflation and Deflation and Their Outcomes

Keynesian theory of unemployment, inflation in the united kingdom.

• Words: 1649

Inflation in Turkey: Contemporary and Past Episodes

• Words: 1609

The “Analyze This! Inflation” Video Reflection

The price deviations and inflation rates, the economic disparity and inflation, the inflation dynamics in the canadian context.

• Words: 1091

“Expected and Realized Inflation…” by Binder & Kamdar

Inflation at the international monetary fund, inflation: types and negative effects, “inflation hits the fastest pace since 1981, at 8.5% through march” by koeze.

• Words: 1112

Inflation Rates and the Value of the Dollar

Monetary union of latin american countries.

• Words: 1333

Inflation’s Impact on Fixed Income

Unemployment and inflation relation, unanticipated and participated inflation, securitization and the credit crisis of 2007, inflation and deflation effects on the us and saudi stock markets.

• Words: 1200

Significance of Inflation to Corporate Finance

History of the kenyan economy: stimulating the economic growth through various means, macroeconomics and hyperinflation in 1914-1923, dollar depreciation issue analysis.

• Words: 1931

Government Spending Stimulation in the Fight Against Inflation

Hyperinflation analysis in zimbabwe.

• Words: 1210

How Should Monetary Authorities React to Higher Inflation

Hyperinlfation in zimbabwe.

• Words: 1755

Gasoline Prices, Rates of Unemployment, Inflation, and Economic Growth

• Words: 1721

Federal Reserve System: Inflation

Able corporation: management of strategic planning.

• Words: 1674

Reasons for a Decrease of a Superannuation Assets Value

• Words: 2338

Interest Rate and Inflation in Netherlands

• Words: 1424

The Austrian Business Cycle Theory

• Words: 1390

“The Debt-Deflation Theory of Great Depressions” by Irving Fisher

Monetary policy in an economy: inflation, hyperinflations factors and eliminating strategies, “inflation rise hits us consumers” bbc article, hyperinflation in a real-life example, consumer price indices for gasoline and electricity in canada, money flows and financial repression in the us and china, maintenance of stable pricing, inflation expectations: households and forecasters, macroeconomic elements: the reduction of oil prices.

• Words: 1663

Inflation Targeting in Emerging Economies

Inflation in the 1970s.

• Words: 1116

Fall in Oil Prices in the mid 2014

• Words: 1943

United Arab Emirates and Norway Economies

• Words: 3493

International Financial Markets and Institutions

• Words: 3365

Inflation Causes: Structuralism and Monetarism

• Words: 2920

Why was Japan so unsuccessful in solving the problem of deflation over the past two decades?

• Words: 2260

The Effects of Inflation Targeting

The euro zone’s rising inflation and unemployment rate, inflation tax – printing more money to cover the war expenses.

• Words: 1683

Economic Condition of Singapore: Inflation Hits 5.2% in March

• Words: 1078

Unemployment Issue in Europe

Inflation is here to stay, as prices will always go up.

• Words: 1604

Exchange and Trade: Analyzing Market Movements

• Words: 2418

Economic Health of the Economy: Memo

The effect of global financial crisis on saudi arabian economy.

• Words: 2710

Keynesian Explanation of Recession

• Words: 1388

Effect of a Permanent Increase in Oil Price on Inflation and Output

Consumer price index: measuring inflation.

• Words: 2178

International Finance. Main Causes of Recent Financial Crisis

The cause of china’s inflation, china’s economic growth and inflation.

• Words: 1105

Deficit Spending

The current impact of inflation and unemployment on germany’s political/economic system.

• Words: 1686

Okun’s Law Associations

Pricing goods internationally.

• Words: 1151

Are you better off than you were four years ago?

Cause of the financial crisis.

• Words: 1675

Inflation in Saudi Arabia

• Words: 5524

Benefits Run Out for Spain’s Jobless: Theories of Unemployment

Unemployment rates in the united states, national unemployment & recession, the monetary and fiscal policy implemented during the great recession, the empirical project: turkey.

• Words: 3283

Inflation Rates in Sweden

Monetary and fiscal policies during the great recession.

• Words: 1419

Role of the Federal Reserve in the US Economy

• Words: 1348

Fiscal Policy and Monetary Policy

Scarcity and choice as economic issues.

• Words: 1351

China Currency Policy and Inflation

• Words: 1344

The Faults of the Consumer Price Index

• Words: 1836

Analysis of Unemployment and Inflation in the United States

Analysis of the performance of domestic & multinational us restaurants, saudi arabia’s oil sector.

One part of the Fed's dual mandate is price stability. Price stability means that inflation remains low and stable over the longer run.

Customers buying up tea before the price rise, Brisbane, Australia, 1954 (via Wikimedia Commons )

Last updated October 12, 2023

Essays in This Theme

The Great Inflation - The Great Inflation was the defining macroeconomic period of the second half of the twentieth century. Lasting from 1965 to 1982, it led economists to rethink the policies of the Fed and other central banks.

Nixon Ends Convertibility of US Dollars to Gold and Announces Wage/Price Controls - President Nixon's 1971 economic plan, sometimes referred to as "Nixonomics," ended gold convertibility and imposed wage and price controls

Oil Shock of 1973–74 - An oil embargo in the early 1970s complicated the U.S. macroeconomic environment

Oil Shock of 1978–79 - The second oil shock of the 1970s was associated with events in the Middle East

Roosevelt's Gold Program - The controversial and consequential policies of FDR regarding gold and dollars

Volcker's Announcement of Anti-Inflation Measures - In 1979, Fed Chairman Paul Volcker announced new anti-inflation measures

Federal Reserve History

We use cookies to enhance our website for you. Proceed if you agree to this policy or learn more about it.

• Essay Database >
• Essay Examples >
• Essays Topics >
• Essay on Government

Free Inflation Argumentative Essay Example

Type of paper: Argumentative Essay

Topic: Government , Inflation , Economics , Money , Economy , Policy , Taxes , Shopping

Words: 1200

Published: 08/06/2021

ORDER PAPER LIKE THIS

Inflation is the continuous increase in the general price levels of commodities in the economy over a period. It is identified with the market fall of the value of money in a particular economy. This recurring price increase erodes the purchasing power of money creating economic distortions and uncertainty (Sargent 2002). Inflation may also be described as a sudden increase in supply of money in a given economy. This results to each unit of currency buying fewer commodities thus a reduction in the purchasing power per unit of money. It can also be viewed as an increase in the supply of money at a rate that is higher than the rate of production in the country's economy. When this price increase is gradual and irregular, it leads to creeping inflation. This is healthy for the economy. It stimulates the economy encouraging social and economic progress. It also makes it easier to adjust relative prices such as salaries employees receive.

While mild and gradual inflation is considered to be an indicator of a healthy economy, inflation above this slow rate has a negative impact in the economy. Taxes imposed to citizens increases with increases in supply of money to the economy. This makes people become more willing to spend because of two main reasons: to purchase commodities before they increase in price and to avoid paying tax on holding currencies. This results to the increase in demand for different commodities thus raising their prices as dictated by price mechanism. This strengthens the rate of inflation and increases the velocity of money; a process referred to as a vicious cycle and is difficult to harness, leading to hyperinflation (Laubach, Mishk, 2001). High inflation rates and hyperinflation lead to bad economic times. As prices rise, the purchasing power of a currency unit decreases thus leading to an increase in uncertainty. This encourages purchasing greasing the vicious cycle while at the same time discouraging savings and investments. Unequal redistribution of money will result. People who receive fixed incomes will continue receiving the same amount which in turn reduces their purchasing power while those on flexible incomes will be able to adjust to inflation. Money will thus be redistributed from those with fixed incomes to those with flexible income. If the inflation rate is higher compared to that abroad, it will lead to deficits in balance of payment resulting from international trade.

Unless it has gone far out of hand, inflation is a controllable. Several approaches can be used to control this. The federal reserve of the U.S counters inflation rates by different fiscal and monetary policies. Fiscal policies come in the form of federal budgeting policies and taxation. However, most market watchers look at financial policies to stabilize the economy. In the US, The Federal Reserve Board's Open Market Committee FOMC is in charge of implementing monetary policies (Sargent 2002). They are charged with the responsibility of limiting or increasing the amount of money circulating in the economy. They make money easier to come by thus encouraging spending to spur economic growth or make it harder to come by when growth rates reach unsustainable levels.

In general, Central Banks in all economies fight inflation by setting high interest rates and reducing the supply of money in the economy. Income policies/ wage and price control policies can be introduced to fight inflation rates. This process all the same has negative effects including distortion of the overall functioning of the economy as it encourages shortages and decrease in quality of commodities. There are several ways used to measure inflation. Consumer Price Index (CPI) is widely used. This approach measures the average prices of a fixed basket of goods and services. This basket of goods reflects what a typical family buys to achieve some desired standard of living in a given period. In the USA, the base set is currently 1982-1984. This base period is adjusted after a given number of years. The Bureau of Labor Statistics (BLS) compiles it on a monthly basis. They weigh each item in the basket according to its total household expenditure share in the base period in order to reflect changes in the index periodically to represent the current household cost of living (Sargent 2002). The items are grouped into eight categories which include: housing, apparel, education and communication medical care and transportation. The three main CPI used are: CPI for all urban consumers, Chained CPI for all urban consumers and CPI for urban wage earners and clerical workers.

Producer Price Indexes (PPI) is another method of measuring inflation by the federal government. It measures average changes in price domestic producers receive for their output using weights attached to their output. It covers virtually all industries. It is compiled monthly by the BLS. Personal Consumption expenditure (PCE) is another method of measuring inflation. The Bureau of Economic Analysis computes it on a monthly basis from the National Income and Products Account NIPA.

Inflation has different economic costs. It has a huge impact on savers, as they lose confidence in money as a real value of saving. It may also lead to higher demand of wages as people anticipate to maintain their current living conditions. Inflation also has an impact on a country's competitiveness and unemployment rate. When a country experiences higher inflation rate than another, it leads to loss in competitiveness worsening their performance in trade. This results to increase in unemployment rate.

Business planning and investment can be disrupted by inflation. Budgeting is made hard due to uncertainties created by rise in prices and costs.Inflation has a couple of other positive consequences associated with it. A stable low rate can allow organizations to raise their revenues, prices and profits and their workers can anticipate an increase in their wages as result (Laubach, Mishk, 2001). Low stable inflation can also help reduce the real value of outstanding debts. A good example is mortgage beneficiaries who benefit from inflation to reduce the real burden on their mortgage.

Fluctuation in exchange rates can also have effects on inflation. Fall in value of the domestic currency against other currencies causes higher import prices. Rising of labor costs that are greater than the improvement in productivity also results into inflation. It is difficult to forecast inflation. Some of the reasons behind this include: volatile energy prices, change in value of currency in relation to other foreign currencies, change in indirect government taxes, volatile food prices and uncertain growth of demand Inflation is a natural phenomenon that a healthy economy must experience. Too high inflation rates and zero inflation rates are, however, harmful to the economy. The government is the entity vested with the responsibility of controlling inflation. When it fails to control it, such negligence will be equated to stealing from its people (Sargent 2002).

Laubach, T. Mishk, F. (2001). Inflation Targeting: Lessons from the International Experience. New Jersey. Princeton University Press. Sargent, T. (2002). The Conquest of American Inflation Princeton paperbacks. New Jersey. Princeton University Press, 2002

Cite this page

Share with friends using:

Removal Request

Finished papers: 1535

This paper is created by writer with

ID 278935128

If you want your paper to be:

Well-researched, fact-checked, and accurate

Original, fresh, based on current data

Eloquently written and immaculately formatted

275 words = 1 page double-spaced

Get your papers done by pros!

Other Pages

Real estate personal statements, altruism case studies, stylists case studies, oprah winfrey case studies, bedroom case studies, spirituality case studies, haiti case studies, bill gates case studies, cricket case studies, public transport case studies, bartow essays, connell essays, faradays essays, fria essays, century aluminum essays, herman miller essays, denuded essays, tenet healthcare essays, cisplatin essays, dorsalis essays, g6pd essays, example of presidential approval essay, free research paper on greece euro crisis, naturalistic studies course work examples, human resource process case study example, theme analysis literature review example, evidence based research article evaluations and applications essay, good example of a1 c essay, free research paper on roberto cavalli brand history, free essay about tort case, free book review about finnish lessons what can the world learn from educational change in finland, example of literary theory and william shakespeares merchant of venice essay, the intention to continue teaching civics and citizenship education among teachers literature review examples, free research paper on police discretion, good example of how the practice of community policing can be applied to homeland security and counter terrorism essay, free the price of civilization book review sample, good airline airport operations course work example, good example of quot as the internet rewires our brains quot review article review, free essay on comparison between the film and the book frankenstein, free essay about alexander calder, free research paper about the nullification crisis of 1832, good essay about strayer, good critical thinking about springdale shopping survey.

Password recovery email has been sent to [email protected]

Use your new password to log in

You are not register!

By clicking Register, you agree to our Terms of Service and that you have read our Privacy Policy .

Now you can download documents directly to your device!

Check your email! An email with your password has already been sent to you! Now you can download documents directly to your device.

or Use the QR code to Save this Paper to Your Phone

The sample is NOT original!

Short on a deadline?

Don't waste time. Get help with 11% off using code - GETWOWED

No, thanks! I'm fine with missing my deadline

Essay on Inflation in India

Students are often asked to write an essay on Inflation in India 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 India

Understanding inflation.

Inflation is the rate at which the general level of prices for goods and services is rising. It erodes purchasing power, each unit of currency buys fewer goods and services.

Inflation in India

India has battled inflation for decades. It’s primarily caused by demand-pull or cost-push factors. Demand-pull happens when demand exceeds supply. Cost-push inflation is when costs of production increase.

Impact on Economy

High inflation impacts the economy negatively. It reduces the value of money, creates uncertainty, and can lead to less economic growth.

Controlling Inflation

The Reserve Bank of India uses monetary policy to control inflation. It adjusts interest rates and reserves to manage money supply.

250 Words Essay on Inflation in India

Introduction.

Inflation, a crucial economic indicator, refers to the sustained rise in the general level of prices for goods and services. It erodes purchasing power, causing distress among the population, particularly those with fixed incomes. In India, inflation has been a persistent issue, influencing both the economic and social fabric of the country.

Causes of Inflation

India’s inflation is primarily driven by supply-side factors. These include agricultural output fluctuations due to unpredictable monsoons, global commodity price changes, and supply chain disruptions. On the demand side, rapid economic growth, rising incomes, and increased government spending can also contribute to inflationary pressure.

Impacts of Inflation

Inflation impacts India in several ways. It reduces the real income of people, especially the poor and those on fixed incomes. High inflation can also deter investment, as it creates uncertainty about future prices, thereby hindering economic growth.

Managing Inflation in India

The Reserve Bank of India (RBI) plays a pivotal role in managing inflation through monetary policy. The RBI uses tools like the repo rate, reverse repo rate, and cash reserve ratio to control money supply and thus, inflation.

While inflation is a complex issue with multiple causes and effects, prudent economic policies and efficient supply chain management can help mitigate its impacts. It is crucial for India to strike a balance between growth and inflation control to ensure sustainable economic development.

500 Words Essay on Inflation in India

Inflation, a sustained rise in the general level of prices for goods and services, is a fundamental economic concept impacting nations worldwide. In India, it has been a persistent issue, influencing the economic stability and growth trajectory of the nation.

Causes of Inflation in India

The causes of inflation in India are multifaceted. The primary cause is the demand-supply imbalance. When demand for goods and services exceeds their supply, prices tend to rise, leading to inflation. This phenomenon is often driven by increased spending by the government or the private sector.

Another significant cause is the cost-push inflation, where the rising cost of production, including wages, raw materials, and overheads, pushes up the prices of final goods and services. Additionally, India’s dependence on oil imports often leads to inflation due to fluctuations in global oil prices.

Impact of Inflation

Inflation impacts the Indian economy and its citizens in numerous ways. It erodes the purchasing power of money, meaning people have to spend more to buy the same quantity of goods and services. This situation is particularly harsh for those with fixed incomes, such as pensioners.

Inflation also creates uncertainty in the economy, discouraging investment and savings, and potentially leading to lower economic growth. Moreover, it can lead to income redistribution, benefiting those who can hedge against inflation and disadvantaging those who cannot.

Measures to Control Inflation

The Reserve Bank of India (RBI) has several tools at its disposal to control inflation. The most commonly used is the manipulation of interest rates. When the RBI increases interest rates, borrowing becomes more expensive, leading to reduced spending and lower inflation.

Another measure is the regulation of money supply through open market operations. By selling government securities, the RBI can absorb excess liquidity from the market, thereby reducing the money supply and controlling inflation.

Inflation, while a natural part of a growing economy, can become problematic if it is too high or volatile. Thus, understanding and managing inflation is crucial for India’s economic stability and growth. While the RBI plays a key role in controlling inflation, structural reforms to improve supply chains, enhance productivity, and reduce dependency on oil imports are also essential. Through a combination of these measures, India can hope to achieve a stable and low inflation rate conducive to sustained economic growth.

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

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

• Essay on India Today
• Essay on History of India
• Essay on Agriculture – The Backbone of the India

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

Happy studying!

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Fatima Hussein, Associated Press Fatima Hussein, Associated Press

Leave your feedback

• Copy URL https://www.pbs.org/newshour/economy/about-1-in-4-us-adults-over-50-say-they-expect-to-never-retire-an-aarp-study-finds

About 1 in 4 U.S. adults over 50 say they expect to never retire, an AARP study finds

WASHINGTON (AP) — About one-quarter of U.S. adults over age 50 who are not yet retired say they expect to never retire and 70% are concerned about prices rising faster than their income, an AARP survey finds.

READ MORE: At 3rd debate, GOP candidates support raising retirement age

About 1 in 4 have no retirement savings, according to research released Wednesday by the organization that shows how a graying America is worrying more and more about how to make ends meet even as economists and policymakers say the U.S. economy has all but achieved a soft landing after two years of record inflation.

Everyday expenses and housing costs, including rent and mortgage payments, are the biggest reasons why people are unable to save for retirement.

The data will matter this election year as Democratic President Joe Biden and Republican rival Donald Trump are trying to win support from older Americans, who traditionally turn out in high numbers, with their policy proposals.

The AARP’s study, based on interviews completed with more than 8,000 people in coordination with the NORC Center for Public Affairs Research, finds that one-third of older adults with credit card debt carry a balance of more than $10,000 and 12% have a balance of $20,000 or more. Additionally, 37% are worried about meeting basic living costs such as food and housing.

“Far too many people lack access to retirement savings options and this, coupled with higher prices, is making it increasingly hard for people to choose when to retire,” said Indira Venkateswaran, AARP’s senior vice president of research. “Everyday expenses continue to be the top barrier to saving more for retirement, and some older Americans say that they never expect to retire.”

The share of people older than 50 who say they do not expect to retire has steadily increased. It was 23% in January 2022 and 24% that July, according to the study, which is conducted twice a year.

“We are seeing an expansion of older workers staying in the workforce,” said David John, senior strategic policy advisor at the AARP Public Policy Institute. He said this is in part because older workers “don’t have sufficient retirement savings. It’s a problem and its likely to continue as we go forward.”

Based on the 2022 congressional elections, census data released Tuesday shows that voters 65 and older made up 30.4% of all voters, while Gen Z and millennials accounted for 11.7%.

Biden has tried to court older voters by regularly promoting a $35 price cap on insulin for people on Medicare. He trumpets Medicare’s powers to negotiate directly with drugmakers on the cost of prescription medications.

Trump, in an interview with CNBC in March, indicated he would be open to cuts to Social Security and Medicare. The former president said “there is a lot you can do in terms of entitlements, in terms of cutting.”

Karoline Leavitt, press secretary for Trump’s campaign, said in a statement to The Associated Press on Tuesday that Trump “will continue to strongly protect Social Security and Medicare in his second term.”

In the AARP survey, 33% of respondents older than 50 believe their finances will be better in a year.

READ MORE: Everything you want to know about Medicare’s rules on health savings accounts

A looming issue that will affect Americans’ ability to retire is the financial health of Social Security and Medicare.

The latest annual report from the program’s trustees says the financial safety nets for millions of older Americans will run short of money to pay full benefits within the next decade.

Medicare, the government-sponsored health insurance that covers 65 million older and disabled people, will be unable to pay full benefits for inpatient hospital visits and nursing home stays by 2031, the report forecast. And just two years later, Social Security will not have enough cash on hand to pay out full benefits to its 66 million retirees.

An AP-NORC poll from March 2023 found that most U.S. adults are opposed to proposals that would cut into Medicare or Social Security benefits, and a majority support raising taxes on the nation’s highest earners to keep Medicare running as is.

Support Provided By: Learn more

Educate your inbox

Subscribe to Here’s the Deal, our politics newsletter for analysis you won’t find anywhere else.

Thank you. Please check your inbox to confirm.

Why more Americans are making hardship withdrawals from retirement accounts

Economy Apr 06

• Share full article

Advertisement

Supported by

The Gen-Z Advantage in Housing

A study suggests that Gen Z has it better in the housing market than the millennials who came before them.

By Michael Kolomatsky

Homeownership has been a touchy subject for Gen Z , as the generation compares its housing fate with that of the millennials who came before them. But have rising housing costs really been harder on Gen Z as its members navigate their 20s? A recent study by RentCafe sheds some light on each generation’s housing burden.

Researchers measured the average housing costs incurred by Gen Z-ers and millennials between the ages of 22 to 30, including rent, mortgage, insurance and utilities, with dollar amounts adjusted for inflation. Down payments were not included. Projections through age 30 were made for Gen Z, as the oldest members of that generation are not yet 30.

On average, the study found, Gen Z-ers — born between 1994 and 2000 — will spend about $145,000 on rent by their 30th birthdays, while millennials — born between 1981 and 1996 — spent $127,000 during the same stage of life. But because Gen Z-ers earn more, the share of income required (27 percent) is roughly equal for both generations.

Owning a home would cost Gen Z-ers about $165,000 during the eight-year period studied, while the millennial cost is greater, about $172,000. And because they earn less on average, millennial owners by age 30 forked over 36 percent of their income to housing, while Gen Z owners can look forward to devoting only about 30 percent of their income.

Of course, much of these costs depend on location. San Jose, Calif., in the heart of Silicon Valley, was found to be most expensive for both generations to buy and rent. Large East and West Coast cities were also among the most expensive. But the choice is simple in these pricey markets: rent. In San Jose, renting would save Gen Z-ers $170,000 over eight years, compared with buying.

Where Gen Z Will Pay the Most for Housing by Age 30

The 10 metros where renting and buying costs are highest for members of Generation Z over an eight-year period (down payment excluded).

COST TO RENT

San Jose, Calif.

San Francisco

Los Angeles

Santa Rosa, Calif.

Washington, D.C.

Bridgeport, Conn.

COST TO BUY

Santa Barbara, Calif.

For weekly email updates on residential real estate news, sign up here .

Inside the World of Gen Z

The generation of people born between 1997 and 2012 is changing fashion, culture, politics, the workplace and more..

A younger generation of crossword constructors is using an old form to reflect their identities, language and world. Here’s how Gen Z made the puzzle their own .

For many Gen-Zers without much disposable income, Facebook isn’t a place to socialize online — it’s where they can get deals on items  they wouldn’t normally be able to afford.

Dating apps are struggling to live up to investors’ expectations . Blame the members of Generation Z, who are often not willing to shell out for paid subscriptions.

Young people tend to lean more liberal on issues pertaining to relationship norms. But when it comes to dating, the idea that men should pay in heterosexual courtships  still prevails among Gen Z-ers .

We asked Gen Z-ers to tell us about their living situations and the challenges of keeping a roof over their heads. Here’s what they said .

What is it like to be part of the group that has been called the most diverse generation in U.S. history? Here is what 900 Gen Z-ers had to say .

DRE #01103083

• Human Resource
• Business Strategy
• Operations Management
• Project Management
• Business Management
• Supply Chain Management
• Scholarship Essay
• Narrative Essay
• Descriptive Essay
• Buy Essay Online
• College Essay Help
• Help To Write Essay Online

Customer Reviews

(415) 397-1966

What Can You Help Me With?

No matter what assignment you need to get done, let it be math or English language, our essay writing service covers them all. Assignments take time, patience, and thorough in-depth knowledge. Are you worried you don't have everything it takes? Our writers will help with any kind of subject after receiving the requirements. One of the tasks we can take care of is research papers. They can take days if not weeks to complete. If you don't have the time for endless reading then contact our essay writing help online service. With EssayService stress-free academic success is a hand away. Another assignment we can take care of is a case study. Acing it requires good analytical skills. You'll need to hand pick specific information which in most cases isn't easy to find. Why waste your energy on this when they're so many exciting activities out there? Our writing help can also do your critical thinking essays. They aren't the easiest task to complete, but they're the perfect occasion to show your deep understanding of the subject through a lens of critical analysis. Hire our writer services to ace your review. Are you struggling with understanding your professors' directions when it comes to homework assignments? Hire professional writers with years of experience to earn a better grade and impress your parents. Send us the instructions, and your deadline, and you're good to go.

Useful Links

• Request a call back
• Write For Us

Read what our clients have to say about our writing essay services!

Is essay writing service legal.

Essay writing services are legal if the company has passed a number of necessary checks and is licensed. This area is well developed and regularly monitored by serious services. If a private person offers you his help for a monetary reward, then we would recommend you to refuse his offer. A reliable essay writing service will always include terms of service on their website. The terms of use describe the clauses that customers must agree to before using a product or service. The best online essay services have large groups of authors with diverse backgrounds. They can complete any type of homework or coursework, regardless of field of study, complexity, and urgency.

When you contact the company Essayswriting, the support service immediately explains the terms of cooperation to you. You can control the work of writers at all levels, so you don't have to worry about the result. To be sure of the correctness of the choice, the site contains reviews from those people who have already used the services.

Finished Papers

Types of Paper Writing Services

How safe will my data be with you.

Benefits You Get from Our Essay Writer Service.

Typically, our authors write essays, but they can do much more than essays. We also offer admissions help. If you are preparing to apply for college, you can get an admission essay, application letter, cover letter, CV, resume, or personal statement from us. Since we know what the admissions committee wants to see in all these papers, we are able to provide you with a flawless paper for your admission.

You can also get help with business writing from our essay writer online. Turn to us if you need a business plan, business proposal, presentation, press release, sales letter, or any other kind of writing piece for your business, and we will tailor such a paper to your requirements.

If you say, "Do not write an essay for me, just proofread and edit it," we can help, as well. Just provide us with your piece of writing and indicate what exactly you need. We will check your paper and bring it to perfection.

Gain efficiency with my essay writer. Hire us to write my essay for me with our best essay writing service!

Enhance your writing skills with the writers of penmypaper and avail the 20% flat discount, using the code ppfest20.

Finished Papers

Once I Hire a Writer to Write My Essay, Is It Possible for Me to Monitor Their Progress?

Absolutely! Make an order to write my essay for me, and we will get an experienced paper writer to take on your task. When you set a deadline, some people choose to simply wait until the task is complete, but others choose a more hands-on process, utilizing the encrypted chat to contact their writer and ask for a draft or a progress update. On some occasions, your writer will be in contact with you if a detail from your order needs to be clarified. Good communication and monitoring is the key to making sure your work is as you expected, so don't be afraid to use the chat when you get someone to write my essay!

Finished Papers

• Election 2024
• Entertainment
• Newsletters
• Photography
• Personal Finance
• AP Investigations
• AP Buyline Personal Finance
• AP Buyline Shopping
• Press Releases
• Israel-Hamas War
• Russia-Ukraine War
• Global elections
• Asia Pacific
• Latin America
• Middle East
• Election Results
• Delegate Tracker
• AP & Elections
• Auto Racing
• 2024 Paris Olympic Games
• Movie reviews
• Book reviews
• Personal finance
• Financial Markets
• Business Highlights
• Financial wellness
• Artificial Intelligence
• Social Media

Panama Papers trial’s public portion comes to an unexpectedly speedy end

The Supreme Court stands in Panama City, Monday, April 8, 2024 as the trial starts for those charged in connection with the worldwide “Panama Papers” money laundering case. (AP Photo/Agustin Herrera)

Juergen Mossack, partner of the law firm Mossack-Fonseca, leaves the Supreme Court during the trial of the “Panama Papers” money laundering case in Panama City, Monday, April 8, 2024. (AP Photo/Agustin Herrera)

Lawyers and court workers leave the Supreme Court during a recess for the trial of the “Panama Papers” money laundering case in Panama City, Monday, April 8, 2024. (AP Photo/Agustin Herrera)

• Copy Link copied

PANAMA CITY (AP) — The public portion of a trial of more than two-dozen associates accused of helping some of the world’s richest people hide their wealth came to an unexpectedly speedy conclusion Friday when a Panamanian judge said she would take the two weeks of trial arguments and testimony under advisement.

The trial came eight years after 11 million leaked secret financial documents that became known as the “Panama Papers” prompted the resignation of the prime minister of Iceland and brought scrutiny to the then-leaders of Argentina and Ukraine, Chinese politicians, and Russian President Vladimir Putin, among others.

Judge Baloisa Marquínez noted Friday that the case included more than 530 volumes of information. The public trial had been expected to run to the end of the month. The judge has 30 working days to issue a verdict.

Those on trial include the owners of the Mossack Fonseca law firm that was at the heart of the 2016 massive document leak. Jürgen Mossack attended the trial, while his partner Ramón Fonseca did not for health reasons, according to his counsel.

Panamanian prosecutors allege that Mossack, Fonseca and their associates created a web of shell companies that used complex transactions to hide money linked to illicit activities in the “car wash” corruption scandal of Brazilian construction giant Odebrecht .

“This whole process from eight years ago until now … has had a lot of consequences for my family, on my personal situation and truly has been a great injustice not just for me but for all of the people who have worked with me,” Mossack testified Friday. “I trust your honor will know how to evaluate all that has been said here.”

Mossack had said at the start of the trial, as he has for years, that he was not guilty of the money laundering charges.

According to Panamanian prosecutors, the Mossack Fonseca firm created 44 shell companies, 31 of which opened accounts in Panama to hide money linked to the Brazilian scandal.

Fonseca has said the firm, which closed in 2018, had no control over how its clients might use offshore vehicles created for them.

Mossack Fonseca helped create and sell around 240,000 shell companies across four decades in business. It announced its closure in March 2018, two years after the scandal erupted.

The firm’s documents were first leaked to the German daily Suddeutsche Zeitung, and were shared with the International Consortium of Investigative Journalists, which began publishing collaborative reports with news organizations in 2016.

“The reputational deterioration, the media campaign, the financial siege and the irregular actions of some Panamanian authorities have caused irreparable damage, whose consequence is the complete cease of operations to the public,” the firm said in a statement at the time.

The Mossack and Fonseca were acquitted on other charges in 2022.