What Is Inflation? Definition And Causes Of Inflation

 What is inflation? Many of these questions are asked of those unfamiliar with the world of economics. Of course, many economic terms are complicated to understand for those who do not follow economic developments in Indonesia. Especially for those who do have limitations in the world of education. 

The word inflation is often heard in the media television as a news picture about the economic conditions in our country. Not a few ordinary people who do not know about the meaning of inflation itself, even though they often hear the word. 

At least as people who are not in their field of economics, we want to find out for ourselves what inflation is and understand what it is. For more details, we will discuss what inflation is and the economic impact if there is inflation. Check out our review of this article.

 

What is Inflation? 

In the language of inflation is the decline in the value of the currency caused by too much money circulating in the community, causing the price of goods to rise. 

Meanwhile, inflation is the condition of a country where the prices of goods and services rise for a long time which causes economic instability due to the imbalance between the money in circulation and the goods available. 

The leading cause of inflation is the circulation of money in the community is too much and is not balanced with the availability of goods. So that the currency's value decreases and there is no price, prolonged inflation will also cause the bankruptcy of a country. This can happen because of many factors, one of which is the government's error in managing state finances.

 

Causes of Inflation 

Many factors cause inflation in a country. From these various factors, you can later assess, according to the conditions that occur in countries in the world, whether they are included in the category of countries affected by inflation. The following are some of the factors that cause inflation.

1# High Money Circulation 

One of the factors that cause inflation in a country is the circulation of money that is too high in the community, so the currency's value has no value anymore. The impact of the unstable circulation of money widely held by the public is that money cannot be used as a medium of exchange for buying and selling, so goods and services must be obtained using a barter system. 

2# Rising Production Costs 

Apart from the money supply factor, high production costs are another factor causing inflation. This results in a snaking economic impact so that each other is affected by the effects. This increased production cost is usually caused by several factors, such as low and high fuel prices and high employee wages. 

3# Rising Demand 

The last factor causing inflation is the increasing number of requests for goods that are not balanced with the amount of production. If this is allowed and occurs for a very long period, there will be economic inflation which has a chain impact on products. 

For example, if cooking oil prices go up 100% and cannot go down for a long time, the prices of other food items will also increase. This impact will eventually lead to prolonged inflation if addressed after some time. 

 

Impact of Inflation 

Inflation has a terrible impact on the economy of a country. Therefore, many countries are cautious in managing their economy so that economic stability is always well maintained. The lousy effect of prolonged inflation is that the economy will be sluggish, and people's purchasing power will decrease, so the economic cycle will not run well. 

In addition, inflation can also affect the value of a country's currency which can cause high costs for import-export transactions between countries. Of course, this is very detrimental to a country.

Many people will live frugally and are reluctant to spend the money they have. As a result, the money does not rotate, and the economic growth of a country will be slow and stagnant. In addition, the longer the currency's value is also getting weaker and has no value.

 

Closing - What is Inflation 

After we describe what inflation is, of course, you better understand the meaning and definition of a meaning of the word inflation. What is more important is that you are more aware of the negative impact of inflation occurs in a country that causes economic instability. 

This is our review of the article about inflation that we can present to you. Our review article can enlighten the meaning of inflation and add insight for you.

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