The term inflation has been seen by many as an incessant increase in prices of goods in a country, yes, it is an increase in price, but the word continuous increase is needed for it to be an inflation. The word ‘inflation’ is coined from a latin term inflare which means ‘to blow up or to inflate’. Therefore, inflation can properly be defined as a continuous increase in price over a specific period of time while the value of money declines.
Inflation has been one of the major factors considered by monetary authorities to change interest rate in any given economy. The control of inflation is a ‘crucial responsibility’ of the monetary authorities, hence, it must be properly monitored to avoid an economic disaster. Nonetheless, inflation is not totally an undesirable economic factor, a relatively low or no inflation will likewise harm the economy. So, no matter how horrible inflation has been preached to a lay man, it is necessary to understand that when it comes to inflation, there is a silver lining in the dark cloud. What any economy should target is a stable and a low (2%) rate of inflation.
Many an individual dislikes inflation, wants to get things at a very cheap price. It is beautiful to note that when a country do not have inflation at all, there exist a fall in prices, this will lead to a bad period for the economy. Businesses might collapse, thereby leading to unemployment, low productivity, it also causes macroeconomic variables to be unstable. Negative inflation also causes shortage in revenue thereby leading to a decrease in government spendings.
The idea or desire of not wanting inflation in an economy should not be the bone of contention, What should concern an individual is that the nominal income should be higher than the nominal prices purchased by such individual. Wishing for a zero inflation economy will only lead to more fall in incomes even as prices fall drastically.
So, next time you hear about inflation, do not be quick to see it as something totally undesirable, check for the percentage. The rate determines the effect in any given economy. A low inflation is the real deal but never wish for an inflation free economy, trust me it is a devil on its own.
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