30 – 04 – 2024
Inflation is essentially a measure of the rate at which the general level of prices for goods and services is rising, and subsequently, how that rise erodes the purchasing power of money. It’s calculated as the percentage increase in the Consumer Price Index (CPI) over a certain period, usually one year¹.
Here’s a simple way to understand it:
Imagine you have a fixed amount of money, and over time, the prices of things you buy regularly, like food, clothes, and fuel, start to increase. If your income doesn’t increase at the same rate as these prices, you’ll find that you can’t buy as much with the same amount of money as you could before. That’s inflation at work – it means that each unit of currency buys fewer goods and services than it did previously, leading to a decrease in your purchasing power.
Economists identify several causes of inflation, such as:
– **Demand-pull inflation**: This occurs when demand for goods and services exceeds supply, causing prices to rise.
– **Cost-push inflation**: This happens when the costs of production increase (like raw materials or wages), and businesses pass on these costs to consumers in the form of higher prices.
– **Built-in inflation**: This is linked to the expectation of future inflation, which can cause workers to demand higher wages, leading to higher costs for businesses and thus higher prices for consumers.
Inflation isn’t inherently bad; moderate inflation is a sign of a growing economy. However, high inflation can be problematic, as it can erode savings and reduce the purchasing power of consumers. Central banks, like the Federal Reserve in the US or the European Central Bank in the Eurozone, aim to control inflation through monetary policy, adjusting interest rates and influencing the money supply to keep inflation within a target range¹².
Origem: conversação com o Bing, 30/04/2024
(1) Inflation: What It Is, How It Can Be Controlled, and Extreme Examples. https://www.investopedia.com/terms/i/inflation.asp.
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