Inflation Research

For instance, food is a basic need in every family. An increase in the price of sugar or any type of food contributes to overspending. Inflation is measured by assessing the mostly used goods and services and calculating how the prices have increased during a specific duration. A sudden increase in prices of services and goods is not considered as inflation since it was unplanned. Inflation rates differ depending on the causes. The prices do not increase fast. They also increase at a less percentage. This means that people do not overspend. Government institutions help in handling inflation. They develop anti-inflation policies that ensure people do not overspend in an attempt to provide basic needs to their families. They do not believe that the amount of money circulating is a possible cause of inflation.

When explained graphically, the increase in government expenditure leads to an increase in the production rates, which influence upward pressure to the prices or goods and services. This means that aggregate demand or supply determine the percentage in which the cost an if items increase with. However, the aggregate supply curve created during the calculation of price increase determines the level of inflation a country or specific region is in. Demand pull inflation, is believed to originate from the non-monetary sector. p). In other cases wages increase hence employees receive higher pay. In order to recover the amount of money used to increase employee wages, organizations increase the price of products and services. This causes inflation since organizations use consumers to make more profit.

An increase in goods and service prices motivates trade unions to request higher wages for the employees. Overprinting of currency notes contributes the loss of its value (Oner n. p). The circulation of printed currencies surpasses the number of goods and services being offered. This leads to an increase in the prices as a way to manage the excess money. Economically, governments are allowed to print money equivalent to the amount of gold in the country. Most third world countries are growing rapidly hence borrowing money from already developed countries. The money borrowed is used in development projects. In cases where the countries have corrupt leaders, they keep the money to themselves instead of allocating it to the development projects. The debts continue increasing as the leaders borrow more money to use on their countries.

An increase in the prices of goods and services helps them collect some money which they use to clear debts and borrow more. p). For instance, an increase in fuel contributes to an increase in amount of money paid by passengers. The employees put up with the increased prices of fare, food and other basic needs. At the end of the day, the employee has no savings and owes the creditors money since his or her salary was not enough to cater for all the basic needs. Creditors benefit since they land people money and expect them to return it at a specific interest. The economy of a country deteriorates due to increased prices (Zakaria n. p). Tourism is always the main contributor to the economic growth of most countries.