Questions about inflation?

Question

During a period of inflation are all prices rising?

Is everyone worse off because of inflation? Why or why not?

Answer 1

People want to make money, they invest, and they get more money back. This causes inflation. (becuase money is 'created')

If there is no Inflation, that means that noone is investing and/or noone is making any money off their investments. This is usually a bad economical situation.

hoewever if there is lots of inflation. prices will go up more rapidly than people salaries, and consumers basically get poorer over time. This is also not a good thing.

Most Economists seem to think that inflation aroun 1-1.5% is a healthy inflation.

Iflation doesnt nesecarily mean that all prices are going up. it does hoewever mean that the majority of prices are going up. When prices are going up, it also does not always signify Inflation.

Answer 2

Inflation is caused by increase in money supply.
The central banking systems are mainly responsible for it as they control the money supply, that is, they can "print" money.

Inflation is calculated using a basket of items.
So not all prices have to rise. Not every govt. calculates inflation the same way and the calculation (and items in the basket) changes over time. So, it's difficult to compare it fairly.

One trick used to counter the effect of these changes is to follow the "stamp index", that is, the evolution of the price of a stamp. Not perfect, but many people believe it more accurately represents inflation than manipulated numbers provided by govt. official. Using this index you will find out that the inflation in the US has been significantly underestimated by the official numbers in the last 30 years.

I believe everyone would be better off without inflation, except maybe the politicians. Central banking systems help them look good in difficult time by increasing the money supply to jump start the economy but in the same time by destroying the value of your hard earn cash and also by creating asset price "bubbles". This is why you want to protect yourself against inflation through wise investments.

Few good examples of the effect of inflation:
- the avg. housing price per square foot in the US is approximately the same it was in the 1950s when adjusted for inflation.
- The avg. worker in the US earned approximately the same amount of money than in the 1950s when adjusted for inflation.

Who would have guessed? Most people thought their salary is actually rising over time... well, it doesn't (in avg.)

I highly encourage you to read scholars from the Austrian School
of Economics.

Answer 3

In an inflation, the prices are rising. People are worst off from inflation because the power of the dollar is reduced or their purchasing power has reduced.

This year, a starbucks latte cost $1.25, next year due to inflation, you have to pay $1.85 for the same latte, you consume the same volume of latte, but the amount you pay have increased. So that means your $ is not worth as much anymore, you need more $ to make the same purchase.

That's why workers on a wage wants an increase in they paycheck every year to be align with the market inflation so that they increase in pay, can match the increase in market prices, so that in relative ratio, they do not lose

Answer 4

Ha, just remember the basic test trick that absolutes like "all" and "everyone" are not correct.

Inflation is calculated as an AVERAGE price change of lots of goods and services. There are ALWAYS things that get cheaper even during inflation. Example, in the US we've had inflation every single year of your lifetime and mine. But during that time lots of things have got cheaper -- computers, long distance phone service, steam irons, plasma TVs, etc.

People who are better off in times of inflation include many debtors (the value of the debt they owe is decreased), people who are invested in certain assets that go up a lot during inflationary periods. Actually in times of mild inflation, the large majority of people get better off.

Answer 5

Inflation is how lots the fee of specific specific products have extra suitable over a year. The basket of things seen is many times a go combination of things bought by using various people. If a u . s . a . has inflation and easily prints money to disguise the fee, the costs will upward thrust swifter by means of fact there is extra money in stream and extra people are spending it pushing up industry fees.

Answer 6

Unexpected inflation can actually correlate with an improved job market.

Continuous inflation, however, does nothing but destroy the savings of a population.

Answer 7

Not all prices are rising just too many.
People doing well are the people who are collecting high interest rates from the poor suckers who have to pay them.

Answer 8

People who have cash (or cash equivilent)assets are worse off. People who have a lot of debt are better off.