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What Causes Inflation To Rise? Does It Matter?

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  • Essay length: 2386 words
  • Submitted: 19/06/2006
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University Degree Macroeconomics

The first 200 words of this essay...

WHAT CAUSES INFLATION TO RISE? DOES IT MATTER?

The term inflation is a well known for the effect it has on wages and

prices. It is a common perception that inflation is a negative aspect in the

economy, however, it is also necessary to remember that although inflation can be a destructive force it is also a requirement in any economy as zero inflation with normally represent zero or negative growth. To understand the effects of inflation and the costs that it might impose on individuals and the society as a whole it is first necessary to understand its causes.

Inflation is usually defined as a continuing or persistent tendency for general price level to rise so it could be said that in effect the rate of inflation measures the change in the purchasing power of money1. The important aspects of this definition are concepts continually and general as it refers to rise in the average price level over a period of time. Inflation is a monetary phenomenon where the price level and therefore the value of money that is changing, not the price of particular product and secondly it is an ongoing

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