what are the consequences of inflation?

Answer 1

People are telling the familiar economic perceptions of what constitutes the economist coined term INFLATION and its consequences, again, in the view of pure economists.. Well. I propose to see this in a socio-economic view as it were, in this forum:

I shall say that the suggestion of inflation concept (that money appearing bigger than the commodity / service it could buy) and the reason adduced for it are much complicated in the fashion of the perfect elites... It is an econmic malady due to various factors of which the main thing is the maldistribution of wealth produced...

Consider the production of pulse grains for example (the illustrations from other commodities would reveal other maladies of the economy but I restrict to one point to drive home the misunderstood fall out of the vague concept of economic inflation). A kilo of say, green or black gram, is produced at an average cost of Rs. 6 (at Rs. 600 for production of about 100 kgs from an acre of rainfed land - the crop being mainly raised that way) by the farmer is sold at any where from Rs.50 - 70 in the city, as packed green gram or black gram dhalls..

And what do you think the primary producer (the poor rainfed farmer) gets for his toil for over two months - sowing, weeding, dusting chemicals against pod borers, picking the pods, thrashing to separate the gram, cleaning, drying and all? He is hardly paid Rs.10 per kg at the farm gate! The agents (who procure, process and sell to whole salers) and the traders (retailers) gain Rs.40 - 60 over the amount they paid, without any risk of drought, pest, pain to stand in the sun, etc.!

In other words, they sell it at 5 to 7 times of farm gate price after incurring precious little for its processing (gram to dhall conversion cost less than a rupee per kg) and transport (again about Rs.0.20 to 0.30 /KG). Compared the investment and risks borne by the poor producer..! This inequity in distribution of the consumer money among the producer, the agents and the sellers - in disproportion to the toil, relative investment hazards, etc - causes the amassing of money at one (tertiary) sector and acute deprival of the due rewards to another (primary) sector.

Thus the farmer is made incapable of accessing the necessities (not facilities) of life, while the intermeidaries and the sellers spend lavishly on unproductive purchase of wealth and services (even his investments on expanding his shop or godowns are not productive expenses, as they do not produce additional goods, but simply pays for some services as wages to workers in the shop and the godown - which is meagre in relative sense).

This analogy can be applied to the host of goods and services (with some modification in the sequence and the ratio of exploitations) in which the average rural and urban citizens are involved... The sweeper, the washerman, the vegetable vendor - nay even the primary teacher, the peons and clerks - a whole lot of citizens get much less share of rewards for their services and could not access the "benefits of development" as our political elite would put it..

Some of them like the govt clerks and peons seek bribes exploiting their positions in between the poor public and their officers (who live like sultans in luxury).. The govt money is spent on an administration that does not really help development but de facto "block" development about which the public no much better,, The more the govt budget for development, the more black money for the executives, their political bosses, the service providers to govt offices etc... These people circulate more money on lavish expenses and hike the cost of living for the common man!

If (a big IF indeed), the wealth created by the primary toilers are reasonably well distributed, there is no reason for price hike or other evils of "inflation"... If you go on engaging in euphimistic or confusing complex theories, you are cheating yourself and the problems would remain unresolved for ever...

I may summarise my arguments by saying that there is no inflation in terms of money value, but there is only the pathological inflation of unethical mal distribution of rewards for goods and services produced by the citizens.

Answer 2

Caused by an excess of demand over supply.

Consequences vary with the level of inflation. Small amounts of inflation can be good for the economy, reducing real interest rates, encouraging people to put their savings in the bank to avoid them losing value over time.

According to neo-Keynesians, since it's very difficult for employers to cut wages in nominal terms, low but steady inflation allows them to fall in real terms over time where there is an excess of labour, thereby reducing unemployment, as employers will hire more workers when wages are reduced.

The downside is there is a small "boot leather" expense in regularly changing prices. High levels of inflation can lead to a loss of confidence in a currency, and therefore exchange rate volatility.

Answer 3

Some of the Consequences of Inflation
- Loss of value in currency
--Lowering of living standards
--Change in spending habits
--Unexpected redistribution of income
- Speculation
-- Distortions of the tax system
-- Uncertainty-(Increased inability to do long term planning due to
inability to forecast prices over long periods)
----Reduction in economic efficiency and real economic growth ;
-- Confusion Cost ;
In a democratic country the ruling party can loose elections and lose the power.

Answer 4

In simple English for you, inflation is when prices of consumer goods start to rise causing it to be a lot harder to buy what you need. When that happens people stop shopping as often and employees start getting laid off. This causes a contraction in the business cycle. It is actually quite simple really. There are no need for big words... just explanation.

Answer 5

Inflation as far as I know is too much currency in circulation. It leads to the decrease in the value of money. That is why in India there is no value for Rs 20/- whereas in the USA, there is very much value
Dont worry I'm an Indian myself

Answer 6

nicely, i'm going to easily say this. Our gasoline has long gone up here in Florida 2.19 extra according to gallon, because of the hurricane. we are in a melancholy and human beings do not desire to have faith it. it fairly is in basic terms going to worsen and worse. that's oftentimes been the rich get richer, unfavorable get poorer. yet now people who earn around a hundred,000.00 according to 3 hundred and sixty 5 days are somewhat stressing. So, i'm confident not rely the place you reside, you experience the crunch, and could experience it much extra so, by potential of next 3 hundred and sixty 5 days.

Answer 7

Savings are reduced, therefore capital for investment is less in future, you may not get a house on rent; if no new houses are built.

Answer 8

price increase beyond buying power of the people.
poverty,
low quality of living and even death of people

Answer 9

loss of earning power, can be a dangerous cycle, devalues monetary system as well

Answer 10

high living cost

lower savings.