I am going to share with you about the overview of inflation.
So what is inflation? It is the sustained increase in the general
price level of goods and services over a period of time.
As inflation rises, every dollar you own can buy a smaller amount of goods and services
in the market. The measurement of inflation is CPI which
stands for consumer price index. So how is consumer price index obtained?
It is obtained by measuring the increase in price of a basket of goods that are purchased
by households. These items in the basket can be housing or
food. Then the authority will calculate the percentage
increase in the price of those goods and can calculate the CPI.
There are several definitions that are related to inflation which are deflation, hyperinflation
and stagflation. Deflation, as the name suggests, is the direct
opposite of inflation. Deflation is the general decrease in the price
of goods and services. It is usually caused by the slow down in the
economic growth. Next, hyperinflation occurs when a country
experiences a very high inflation rate. For example, Germany experienced hyperinflation
when the price level rose 2500% in just one month
Last but not least, stagflation is the combination of high unemployment rate, economic stagnation
and inflation. This sounds contradictory, doesn’t it?
However it does exist in the real world. In the next tutorial, I am going to talk about
the impacts of inflation as well as various causes of inflation.
Thank you for watching!