Inflation
From Conservapedia
In economics, inflation is a general rise in the price of goods and services in relation to purchasing power.
Prices tend to go up when demand from consumers exceeds the normal capacity of producers to supply goods and services. An excess supply of goods and services tends to put downward pressure on prices. See supply and demand.
High inflation undermines the economy's ability to generate long-lasting growth and job creation. Consumers and investors may put off purchases because of uncertainty. High inflation erodes the value of incomes and savings. People on fixed incomes, including the elderly and poor are particularly vulnerable to inflation.
Hyperinflation is out of control inflation and has occurred when there is a massive imbalance between the supply and demand and a complete loss of confidence in the currency. It has occurred when prices are decontrolled by central governments, like in the collapse of the USSR, where inflation reached over 1000% in some areas. [1]
Politics and inflation
Bruce Bartlett wrote:
- Inflation is fundamentally a monetary phenomenon. The inflation of the 1970s came about primarily because Fed chairman Arthur Burns gunned the money supply to get Richard Nixon re-elected in 1972. He was followed by G. William Miller, appointed by Jimmy Carter. Miller didn’t have a clue about monetary policy and only made the dismal inflation situation he inherited far worse. [2]
Measures of inflation
For a more detailed treatment, see consumer price index
The most widely used measure of inflation is the consumer price index (CPI). It reflects changes in the price of a representative "basket" of goods and services sold:
- food
- housing
- transportation
- furniture
- clothing
- recreation
- other items
The inflation rate is expressed as a percentage increase in average prices over a year. For example, if the cost of the CPI "basket" rises from $100 one year ago to $102 today, the current inflation rate is 2 per cent. When the CPI rises, the purchasing power of the average consumer's dollar falls.[2]
