In international news reports, we can often see an enduring hot topic - inflation, for example, "high inflation crushes consumption, causing the outlook of the xxx industry to be worried" or "inflation weighs on the US economy" and "inflation in the eurozone remains high".
So, what is inflation?
Inflation, or inflation, is a very important and complex economic phenomenon. To put it simply, inflation is the overall ** continuous rise in goods and services, and we usually use the CPI (Consumption** Index) to measure inflation. So, what is the nature of inflation? What is the reason for inflation? Let's dive in.
Inflation, simply put, refers to the widespread and sustained rise in goods and services. In other words, more and more money is spent to buy the same goods and services. For example, if last year you could buy 6 eggs for 10 yuan, and this year you can only buy 3 eggs for the same 10 yuan, then we can say that there is inflation in the commodity eggs. However, in real economic life, inflation often refers to an overall rise in all goods and services, such as food, clothing, furniture, real estate, cars, and so on.
Depending on the magnitude and speed of the rise, we generally divide inflation into the following three scenarios:
Creeping inflation: Inflation is below 2%-3%, and the range of goods is small, but it lasts for a long time, and economic growth in this case tends to be more normal.
Moderate inflation: The inflation rate is between 2% and 10%, the range of goods is moderate, and the impact on the economy is relatively small. In general, moderate inflation appears below 10%.
Hyperinflation: Inflation continues to exceed 10% and goods are fast***, and the economic environment is usually harsh, which can lead to large-scale employment problems and financial crises.
So why does inflation have such a profound impact on our daily lives and the economic environment as a whole?
First of all, when inflation occurs, prices** will cause the cost of living for people to rise, which in turn will affect the living standards and spending habits of households. If inflation persists, it could also trigger social instability.
Second, inflation also affects the operations of commercial enterprises. Prices may lead to an increase in the cost of production for companies, and the cost of products will need to rise accordingly to maintain profits, which may lead to a decline in consumer demand, which in turn will lead to the problem of weak economic growth.
In addition, inflation has implications for policymakers as well as on the long-term planning of the economy. There is a need to find a balance between maintaining economic development and controlling inflation, which is an extremely important task for a country's economic management system.
To sum up, we can see that inflation is a complex phenomenon involving macroeconomic, micro-business, and even all aspects of social life, and it has an important impact on the healthy development of a country and society.