Can someone expain me what inflation is and WHY it is bad?

Answer 1

this is basicaly when items you once bought for £1 now cost £1.50 so inflation costs you more

Answer 2

Inflation is a 20th century and now 21st century phenomenon. Our modern economies operate on fiat ( declared) currencies: Basically Its money because the Government says it is. It used to be that the value of money was linked to a weight of precious metal , a pound sterling was in fact a pound of sterling silver ( 240 sterling silver pennies weighed a pound).
Now days only way banks and governments control the amount of money that is printed is by the interest rates. Increasing interest rates increases the costs of business, that increases the cost of goods. Some have stated that inflation is a stealth tax. How bad is it? Well a sovereign ( originally a 1 pound coin) in 1817 would actually purchase less in 1817 than it did in 1890, because in the 19th century things got cheaper. That same amount of gold now will purchase goods to the value of almost 80 pounds. The short answer is inflation is the process by which goods become more expensive over time.

Answer 3

Inflation is defined as the change in the level of prices. Most of the time, people mean the "Consumer Price Index" or "CPI" when they discuss inflation in a country. This is the change in the price "shopping basket" of consumer goods for a country that the national statistics agency has sampled over time on a monthly basis. The "core CPI" is the change in prices without the food and energy components, or "ex food and energy". Since food and energy prices are volatile, the "core CPI" is thought to be a more accurate measure of underlying inflation.
Why is it so bad?I think one simple reason is higher inflation means that we have to get that much more out of our job to stay even.In other words, if the inflation rate is 5 per cent a year that means you’ve got to get a 5 per cent pay rise just to keep pace with rising costs.
From a business perspective, inflation eats into business profits. It … gives businesses a much more difficult time adjusting, for example, to international competition
On the investment front, inflation sort of clouds what we are getting from our investment returns. For example, let’s say you are earning 6 percent on an investment. If we had no inflation, that would be a very good return. But if inflation is 5 percent, that’s a very bad return, so you have to keep that in mind when you are looking at these investment alternatives.
And then, last, inflation often leads to higher interest rates, and so anyone who wants to borrow money it’s going to be more expensive. So I think for these many, many reasons this is why economists tend to prefer lower inflation.

Answer 4

Inflation is when prices increase over the course of time and is usually measured in terms of an annual percentage. Inflation can be good and bad. I like inflation. My wages rise every year inline with it but my borrowing doesn't. For example when my dad bought his house he paid £3750 for it. It is a 3 bed semi worth £150,000 now. Over the same period his wages went from about £1000 a year to £30,000 a year. So inflation meant that as time went by his mortgage payments got smaller and smaller in relation to his wages. The same can be said of fixed rate loans. So in that respect inflation is good.
Inflation can be bad if your wages don't go up in line with it or you get hyper inflation where prices rise very quickly. This not only means that people may no longer earn enough to pay for basic necessities but it also have a very bad effect on the value of the countries currency.

Answer 5

It is bad because it means that prices are going up in the shops.

The government usually use interest rates to curb inflation.

But it can be good if you have a mortgage on a property as the price of the property will go up and the amount you have to pay back is less compared to how much you earn.

Because if inflation is rising then usually wages rise too.


Knowall - What you described is not inflation, it's a deficate.

Answer 6

Money is supposed to be a store of value. Inflation reflects the failure of money to store value as more and more money is required to purchase the same goods and services.
There are many causes but productivity , or the lack of it is one of them.
The opposite of inflation is deflation. This would be a situation in which prices were falling.
The western world is currently in it's longest ever period of inflation (since 1945)
I suggest you read the book 'The Great reckoning' by William Reece Mogg and James Davidson.
This was first published around 1993 and describes a possible period of deflation in the future. It would be far worse news than inflation.

Answer 7

Inflation is when the currency falls in value, so that goods cost more. A small amount of inflation is healthy, especially if wages rise to keep pace.

High inflation seriously erodes the value of a currency, making goods form overseas more expensive - wages and interest rates don't keep pace so people have less money to spend and savings are worth less.

However, if you are in debt, inflation will erode your debt, so you could argue that high inflation would be a good thing for you

Answer 8

Inflation is the situation wherein the price of the commodities are high and the value of money is less. It is bad for the economy because the people will have a hard time buying things for their money. Thus, when people have no purchasing power, the prices will come down and it is also bad for the producers.

Answer 9

in Economics / Financial Management Inflation is defined as the scale to identify the cost of living / cost of national debts / cost of production / cosst of services with an accepted index based on previous standard average.

Inflation in simple form "too much money will chase too little products"

Again simplified as "You go with a large basket of money and buy a small bag full of merchandise".

The value of the prodect remains the same, due to inflation the prices rise.

It is bad due to:
1. Rate of inflation will not get the same amount of merchandise and services compared to last month. That is price rise and no increase in the remuneration.
2. Fixed income groups like pensioners, depending Fixed Deposit interest for running a family have to sacrifice certain necessities to pay for the services (eg. medication).
3. Students / apprentices will face lot troubles to fulfil their requirements due to inflation!!

Answer 10

It is when the price of goods rise and the dollar buys less. For example, if the inflation rate is 2% annually, then theoretically a $1 pack of gum will cost $1.02 in a year.

Answer 11

in a nut shell it is a rise in prices or the cost of living caused by high spending. It is bad because it increases the prices of everything and makes it hard for poorpeople to survive. Governments and people with the responsibility for controlling spending in countries try to control it by putting measures in place like increasing interest rates on bank loans, changing taxees or introducing new taxes etc. These measures usually means a rise in the cost of living.