Inflation, Deflation, Stagflation: Explanation
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12 سال پیش
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Inflation, deflation and stagflation all
Inflation, deflation and stagflation all indicate that there is a change in the prices for goods and services relative to what the prices had been. Inflation indicates that prices are rising; deflation indicates that prices are falling and stagflation generally indicates that although prices are rising, the economy is "stagnating" or not growing. Each of these changes in the general prices for goods and services can cause disruption and therefore the Federal Reserve Board in the United States is responsible to monitor prices so that there are no abrupt changes that could damage the economy.
The Federal Reserve Board monitors prices and then adds money or removes money in circulation to either encourage or discourage more economic activity that affects prices. When the economy is very brisk, prices generally rise as there is more demand for goods and services; whereas, when the economy is very sluggish, prices tend to fall as the demand is below normal. The average individual has a certain amount of "purchasing power" of goods and services they are accustomed to be able to purchase. Movement in the price structure whether due to inflation, deflation or even stagflation undermines people's confidence which can them cause their buying habits to change. This is magnified by consumer activity and can cause abrupt changes to the overall level of economic activity as the consumer accounts for the majority of economic activity. Therefore, gradual and minimal changes to the price level is desirable to keep people's confidence high and the economy on a consistent path free of inflation, deflation or stagflation.
The Federal Reserve Board monitors prices and then adds money or removes money in circulation to either encourage or discourage more economic activity that affects prices. When the economy is very brisk, prices generally rise as there is more demand for goods and services; whereas, when the economy is very sluggish, prices tend to fall as the demand is below normal. The average individual has a certain amount of "purchasing power" of goods and services they are accustomed to be able to purchase. Movement in the price structure whether due to inflation, deflation or even stagflation undermines people's confidence which can them cause their buying habits to change. This is magnified by consumer activity and can cause abrupt changes to the overall level of economic activity as the consumer accounts for the majority of economic activity. Therefore, gradual and minimal changes to the price level is desirable to keep people's confidence high and the economy on a consistent path free of inflation, deflation or stagflation.
12 سال پیش
در تاریخ 1391/11/26 منتشر شده
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