INFLATION Inflation Inflation is the rate at which
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INFLATION
Inflation �Inflation is the rate at which the level of the cost of goods and services in the marketplace all go up at once which causes consumers' purchasing power to decline. �In simple terms inflations is the rise in the cost of living.
What causes Inflation �There is a strong link between inflation and money supply, many economist believe if the amount of money in circulation rises so will prices. �Demand in the economy; if demand for products exceeds the capacity of factories to build them, prices will rise. Prices fall if fewer and fewer people want to buy those products. �Some economist warn that the higher inflation rate we’ve been seeing is a result of all the economic stimulus that governments have been injecting to try to deal with the recession of 2008 -2009.
How is Inflation measured in Canada? �Statistics Canada tracks Canada’s inflation rate through the Consumer Price Index �The Consumer Price Index (CPI) is an indicator of changes in consumer prices experienced by Canadians. It is obtained by comparing, over time, the cost of a fixed basket of goods and services purchased by consumers. �Since 1992, the rate of CPI inflation in Canada has fluctuated around 2 per cent
Deflation �Is the opposite of inflation. When prices fall you have deflation. �Most governments don't want to see prices fall. If people believe it will cost less to buy something in a month, they'll put off that purchase. If enough people do that, then prices will come down, but this can cause a downward spiral as if people stop purchasing; companies stop producing products, and as demand falls and people lose their jobs.
Stagflation �This is when an economy is at a stand still and prices for goods and services still rise. �This is usually a time of very slow economic growth and a high unemployment rate. �This can result in a recession.
Hyperflation �Is the worst of all “flations” Many economists agree that hyperinflation is: “an inflationary cycle without any tendency toward equilibrium. " It can be a vicious circle of constant and rapidly rising prices. �There are many factors can cause hyperinflation but the most direct cause is an unchecked increase in the money supply.