what is problem related to inflation.explain it
Answers
Answer:
Inflation is a measure of the rate of rising prices of goods and services in an economy. If inflation is occurring, leading to higher prices for basic necessities such as food, it can have a negative impact on society.
Inflation can occur in nearly any product or service, including need-based expenses such as housing, food, medical care, and utilities as well as want expenses such as cosmetics, automobiles, and jewelry. Once inflation becomes prevalent throughout an economy, the expectation of further inflation becomes an overriding concern in the consciousness of consumers and businesses alike.
Central banks of developed economies, including the Federal Reserve in the United States, monitor inflation. The Fed has an inflation target of approximately 2% and adjusts monetary policy to combat inflation if prices rise too much or too quickly.
Inflation can be a concern because it makes money saved today less valuable tomorrow. Inflation erodes a consumer's purchasing power and can even interfere with our ability to retire. For example, if an investor earned 5% from investments in stocks and bonds, but the inflation rate was 3%, the investor only earned 2% in real terms.
KEY TAKEAWAYS
-Inflation is a measure of the rate of rising prices of goods and services in an economy.
-Inflation can occur when prices rise due to increases in production costs, such as raw materials and wages.
-A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product.
-Some companies reap the rewards of inflation if they can charge more for their products as a result of high demand for their goods.
an economy balances the decrease in purchasing power with an increase in income. In other words, that $1 buys less labor, just as it buys fewer goods. You need more money to buy things, but you also earn more money for your work, hence the rise in median income over time that occurs along with rising prices.
Price inflation causes a problem in the economy if income growth doesn’t keep up with it. When prices rise by more than 50% per month, this excessive inflation is called hyperinflation.