What is “Economic Inflation”?
Inflation is the increase in the price of goods and products that is associated with a weakened purchasing power of consumers, and a government’s inability to control this increase. Suppose, for example, that a product, like a box of chocolate, used to be sold for $10 last year. With the advent of this year, its price has increased to be $20, thus, weakening the purchasing power of customers who were able to purchase this product for a lower price last year.
What are the types of “Economic Inflation”?
Authentic Inflation
It arises when the population in the country increases, and results in an increase in the people’s consumption of various commodities. This results in the government pumping money into the economy, and this is normally accompanied by an increase in prices.
Hyperinflation
When the demand for a product increases while its production rate stays the same, this leads to a continuous increase in its price.
Pent-up Inflation
This type of inflation arises when the government intervenes to prevent the price of a product from rising above a certain level and to keep its price stable.
Causes of Inflation
Economic Blockade
When a country suffers from an economic blockade and economic sanctions made by other countries, this leads to an imbalance in the economy of this country and to the emergence of economic inflation.
Increase in Demand
When the demand for certain products increases, the company increases the prices due to the quantity of production remaining the same. This way, they force customers to accept the new (higher) prices.
Increases in the Costs
Increases in the costs of production push companies to raise their selling prices to get a compensation for the additional expenses.