Lạm Phát (Inflation) Là Gì? Nguyên Nhân Gây Ra Lạm Phát

Ever hear your grandmother talk about how everything was cheaper when she was younger? That’s because of inflation. It’s caused by irregularities in supply and demand for products và services, leading lớn an increase in prices.

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It has its advantages, but overall, too much inflation is a bad thing: why would you want lớn save sầu your money if it’s going lớn be worth less tomorrow? To control inflation when it gets too high, governments deploy policies that ayên khổng lồ reduce spending.

Contents

Causes of inflationRemedies khổng lồ inflationPros and cons of inflation

Introduction


Inflation can be defined as the reduction of the purchasing power of a given currency. It’s the sustained increase in the price of goods và services in an economy.

While “relative-price change” usually means just one or two goods have increased in price, inflation refers khổng lồ an increase in costs of nearly all items in the economy. Also, inflation is a long-term phenomenon – the increase in prices has khổng lồ be sustained, and not just a sporadic event.

Most countries persize annual measurements of inflation rates. Generally, you’ll see inflation expressed as a percentage change: its growth or decline relative to lớn the previous period.

In this article, we’ll go over the different causes of inflation, ways lớn measure it, and the impacts (both positive sầu and negative) that it can have sầu on the economy.

Causes of inflation


On a basic cấp độ, we can describe two comtháng causes of inflation. First, a rapid increase in the amount of actual currency in circulation (supply). For instance, when European conquistadors subjugated the western hemisphere in the 15th century, gold & silver bullion flooded inlớn Europe and caused inflation (the supply was too high).

Second, inflation can occur due khổng lồ a supply shortage in a specific good that is in high demvà. This can then spark a rise in the price of that good, which may ripple through the rest of the economy. The result can be a general rise in prices across nearly all goods và services.


But if we dive sầu deeper, we can describe different kinds of events that may lead khổng lồ inflation. Here, we’ll distinguish between demand-pull inflation, cost-push inflation, and built-in inflation. There are other variations, but these are the major ones in the “triangle model” proposed by economist Robert J. Gordon.

Demand-pull inflation

Demand-pull inflation is the most comtháng kind of inflation, caused by an increase in spending. In this instance, demvà outweighs the supply of goods & services – a phenomenon that causes prices to rise.

To illustrate this, let’s consider a marketplace where a baker sells his goods. He can produce approximately 1,000 loaves of bread per week. This works well, as he sells roughly that amount every week.

But suppose then that there’s a massive increase in the dem& for bread. Perhaps economic conditions have sầu improved, meaning that consumers have sầu more to lớn spend. As such, we’re likely to lớn see the price of the baker’s loaves increase.

Why? Well, our baker is operating at full capathành phố when he makes the 1,000 loaves. Neither his staff nor his ovens can physically produce more than that number. He could build more ovens và hire more staff, but this takes time.

Until then, we have too many customers and not enough bread. Some customers will be willing lớn pay higher prices for a loaf, so it’s only natural that the baker increases his pricing accordingly.

Now, apart from the increased demand for bread, imagine that the improved economic conditions also led khổng lồ a higher demand for milk, oil, and several other products. This is what defines demand-pull inflation. People are buying more & more goods in a way that demvà outpaces supply – causing prices to lớn rise.

Cost-push inflation

Cost-push inflation occurs when price levels rise as a result of increased raw material or production costs. As the name suggests, those costs are “pushed” khổng lồ the consumer.

Let’s revisit the baker from earlier. He’s built his new ovens and hired additional staff lớn produce 4,000 loaves of bread a week. For the moment, the supply caters khổng lồ the demvà, & everybody’s happy.

One day, the baker gets some unfortunate news. The wheat harvest has been particularly bad this season, meaning that there’s not enough supply lớn go around all the bakeries in the region. The baker must pay more for the wheat needed lớn produce the loaves. With this added expenditure, he needs to raise the prices he charges, even though consumer demand hasn’t increased.

Another possibility is that the government increases the minimum wage. This adds to the baker’s production costs, so, once again, he must raise the prices of the completed loaves.

On the gr& scale, cost-push inflation is often caused by shortages in resources (lượt thích wheat or oil), increased government taxation on goods, or falling exchange rates (resulting in imports costing more).

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Built-in inflation


Built-in inflation (or hangover inflation) is a type of inflation that arises from past economic activity. As such, it can be triggered by the previous two forms of inflation if they persist over time. Built-in inflation is closely related to the concepts of inflationary expectations và price-wage spiral. 
The first describes the idea that – after periods of inflation – individuals and businesses expect inflation to persist in the future. If there was inflation in the previous years, employees are more likely khổng lồ negotiate higher salaries, causing businesses to lớn charge more for their products và services.

The price-wage spiral is a concept that illustrates the tendency of built-in inflation to cause more inflation. It may occur when employers và workers can’t reach an agreement on the value of their wages. While workers demand higher wages to protect their wealth from expected inflation, employers are forced khổng lồ increase the costs of their products. This may lead to lớn a self-reinforcing cycle, where workers demvà for even higher salaries in response to lớn the increased costs of goods and services – và the cycle continues.

Remedies to lớn inflation


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The opposite of QE is quantitative sầu tightening (QT), which is a monetary policy that can reduce inflation by decreasing the money supply. However, there is little evidence that supports QT as a good remedy to lớn inflation. In practice, most central banks control inflation by raising the interest rates.

Higher interest rates

Higher interest rates make it more expensive sầu lớn borrow money. As a result, credit becomes less attractive to consumers và businesses. At the consumer level, increased interest rates will discourage spending, causing demand for goods and services to lớn decrease.

It becomes attractive sầu khổng lồ save during these periods, & even better for those that lend money lớn earn interest. However, the economy’s growth might get constrained, as businesses và individuals are more cautious of taking out credit khổng lồ invest or spend.

Altering fiscal policy


While most countries make use of monetary policies to lớn control inflation, altering fiscal policy is also an option. Fiscal policy refers lớn the governments’ spending & adjustment of taxes khổng lồ influence the economy. 

If governments increase the income tax they collect, for example, then individuals once again have less disposable income. In turn, there’s less demand in the market, which should theoretically reduce inflation. However, this is a dangerous route lớn take, as the public might react unfavorably to higher taxes.

Measuring inflation with a price index


So we’ve sầu outlined the measures to combat inflation, but how bởi we actually know that it needs combatting in the first place? The first step, evidently, is khổng lồ measure it. Typically, this is done by tracking an index over a set period of time. In many nations, a Consumer Price Index (or CPI) is the go-to lớn measure of inflation.

A CPI takes inkhổng lồ tài khoản the prices of a wide variety of consumer products, using a weighted average to value a basket of items and services bought by households. This is done every so often, và the score can then be compared with historical ones. Entities lượt thích the US’s Bureau of Labor Statistics (BLS) collect this data from stores all around the country to ensure their calculations are as accurate as possible. 

You might look at a CPI score of 100 for the “base year” in your calculation, and then at a score of 110 two years later. You could then reach the conclusion that, over two years, prices have increased by 10%.


A small amount of inflation isn’t necessarily a bad thing. It’s a natural occurrence in the fiat currency systems of today and is somewhat beneficial as it encourages spending and borrowing. Keeping a cthất bại eye on the rate of inflation is important, however, khổng lồ ensure that it doesn’t have any negative sầu effects on the economy.

Pros and cons of inflation

At first glance, inflation may appear khổng lồ be something worth avoiding altogether. But it remains part & parcel of modern economies, so it’s a much more nuanced subject in reality. Let’s look at some of the advantages và disadvantages.

Pros of inflation

Increased spending, investment, & borrowing

As we touched on earlier, a low rate of inflation can benefit the economy by stimulating spending, investment, & borrowing. It makes more sense to lớn acquire goods or services immediately, as inflation makes it so that the same amount of cash will have reduced purchasing power in the future.

Higher profits

Inflation prompts companies khổng lồ sell their goods and services at higher prices, so as khổng lồ protect themselves from the effects of inflation. They can justify these increases, but they can also raise prices a bit higher than needed lớn pocket additional profits.

It’s better than deflation

As you might guess from the name, deflation is the opposite of inflation, marked by a decrease in prices over time. Since prices are falling, delaying purchases makes more sense khổng lồ consumers, as they can get better prices in the near future. This can negatively impact the economy, as there isn’t as much demand for goods và services. 

Historically, periods of deflation have resulted in higher unemployment rates và a shift towards saving instead of spending. While not necessarily a bad thing for the individual, deflation tends to hinder economic growth.

Cons of inflation

Currency devaluation and hyperinflation

Finding the right rate of inflation is difficult, & failing lớn control it can yield catastrophic consequences. Ultimately, it erodes the wealth that individuals hold: if you store $100,000 in cash under your mattress today, it won’t have sầu the same purchasing power in ten years.


High inflation can lead to hyperinflation, which is said to occur when prices rise by more than một nửa in one month. Paying $15 for a basic necessity that only cost $10 weeks prior isn’t ikhuyến mãi, but it rarely stops there. In periods of hyperinflation, prices often far exceed the 1/2 rate, essentially destroying the currency và the economy.

Uncertainty

If inflation rates are high, uncertainty can take hold. Individuals and businesses are unsure of where the economy is heading, so they’ll be more cautious with their money – leading lớn less investment and less economic growth.

Government interventionism
Some are opposed to the idea of the government attempting lớn control inflation, citing free-market principles. They argue that the government’s ability to lớn “create new money” (or Brrrrr, as it’s popularly known in cryptocurrency circles) undermines natural economic principles.

Closing thoughts

The effects of inflation are such that we witness prices increase over time, causing the cost of living lớn rise. It’s a phenomenon that we’ve come khổng lồ accept – after all, if it’s controlled correctly, inflation can be beneficial to lớn the economy.

In today’s world, the best remedies appear to lớn lie in flexible fiscal and monetary policies, which allow governments to lớn adapt khổng lồ keep rising prices in kiểm tra. However, these policies must be very carefully implemented, or they could kết thúc up causing further damage lớn the economy.


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