Inflation is generally the general rise in the price level, which leads to the reduction of the real value of money. The primary target of microeconomic policy in the modern economy is to contain inflation (Baumann & McAllister, 2015). There are different types of inflation, and if all of them are balanced, then it would have no significant effects on the economy, but real-world fluctuations are rarely fully balanced and cannot be anticipated. I got interested in conducting further research on inflation because of academic curiosity. I realized that inflation is a broad topic because it affects many economic sectors. For instance, Bernanke et al., (2018), says if inflation is not balanced, then it affects relative prices, real interests, and tax rates. Unanticipated inflations also lead to mistaken investments and irregular redistributions of income. Steps to reduce inflations come with costs such as lower output and unemployment. Generally, inflation is a broad topic that requires more academic research.
Practically, the growth in inflation is measured by the variation in the Customer Price Index (CPI). To apprehend this occurrence, Hansen (2016), in his article: A Study in the Theory of Inflation says that one is supposed to know the difference between the universal price upsurges that happen once and always and those prices that rise is constant over time. In the rise in prices, a distinction can be made in regards to the magnification degree. In some countries, inflation is measured under 10% annual normal inflation where some do not go beyond 20% yearly and in some states where price growth has surpassed 100% yearly. When the difference in the price is 50% in a month, this is referred to as hyperinflation.
Hansen (2016), says that the process of inflation can be instigated by unnecessary making of money by the monetary experts in a state. In such situations, the flow of cash grows at a higher rate than the services and goods that the economy provides, leading a rise in prices. The need for the country to finance its deficits, in turn, motivates the unnecessary making of money. The economic expectations of the agents on the evolution of future prices also lead to inflation. This is vital since operators can anticipate an increase in prices in short to intermediate term, seek to hastily integrate this to incomes and other expenditures set by bond. This can lead to severe inflationary pressures, which, when put in practice, can cause a rise in price more than anticipated.
According to Hansen (2016), inflation exists in different forms. First, we have monetary inflation. This is the artificial upsurge in the stream of money, and it is the main historical cause of inflation. It enables an increase in demand before there is a rise in supply. Secondly, there is price inflation, which is the natural hostile deflationary feedback of the market towards money inflation. By lowering the buying supremacy of all currencies in flow, and by reducing the buying power of credit built on resources, increasing prices strongly if somehow tardily frustrate the pleasurable artificial rise in the buying power which is the aim of monetary inflation. Price inflation increases demand and reduces supply. Lastly is the real inflation, which is the level at which inflationary reasons would affect the intensities of the price if every inflationary cause were deliberated, and the time difference was eradicated. Since it is incredible to measure precisely, it can only be done through evaluation, leading to figures or number of figures made up of reasonably inexact estimates.
The cited work relate specifically to the content of this paper in that it offers a clear insight and a broader view on the concept of inflation, especially the unexpected, which causes indecision around the impending prices, which upsets decisions on expenditure, saving and investment, leading to poor distribution of capitals and therefore affecting economic growth. The cited work explains that even if inflation is not so popular among the consumers, most do not like paying more for a product from time to time, also if a similar amount has augmented their earnings, and the administration has turned to be the repression of inflation in one of the most significant of its political-economic program. Malmendier & Nagel (2015), says that in most of the industrialized countries, inflation is being controlled through technological improvements, use of the deteriorating impact of unions, denationalization and the developing national and global struggle which are the main drivers of the cost of raw material and energy products hence the ultimate price of goods and services offered, rather than applying the anti-inflationary strategy of the involved government.
The materials researched was in line with the cited article. The 5 articles offer a vast knowledge of the concept of inflation. For instance, Gilchrist et al., (2017), says that it would be more practical to view inflation, not as money but emphasize on the real case-mix which would reflect on the inflationary concept; the production scheme constraints that affect the equilibrium amid supply and demand of goods and services, organization of prices absorbed by involved economic groups, and the taut circulation of earnings between the beneficiary groups. Inflation remains a complex concept which is yet to create the correct social cost and value acquiescence within specific objectives of merging in the multifaceted course of monetary union; hence, more research is required.