The Effects Of Inflation

Want to read the rest of this paper? Join Essayworld today to view this entire essay and over 50,000 other term papers

Inflation is clearly measured by the price index such as those numbers stated above. Price Index clearly measures the general level of prices in any year relative to prices in a base period. There are different types of inflation one is Demand Pull Inflation; meaning "changes in the price level are attributed to an excess of total spending beyond the economy's capacity to produce. Because resources are fully employed, the business sector cannot respond to this excess demand by expanding output, so the excess demand bids up the prices of the limited real output, causing demand pull inflation." This more or less is called "too much spending chasing too few goods." Demand-pull inflation will continue as long as there is excess total spending versus a Cost-push inflation, which automatically is self-limiting; it will die out by itself. Increased per-unit costs will lead to reduce supply, which means decreased real output and employment. These decreases will constrain further ...

Get instant access to over 50,000 essays. Write better papers. Get better grades. Already a member? Login

CITE THIS PAGE: