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Inflation

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Inflation is a continual increase of the level of consumer prices or it is a decline in the power of money to be a purchasing resource. These two effects are caused by the growth of currency which is available and the credit, not taking into account the proportion of available services and goods. Inflation can have negative results on some consumers and positive results on others, it depends on the situation.

For example, when there is the increase of the average level of prices, some prices become higher faster than other prices. As a result, it affects a specific group of people. For instance, in 2000 prices for gasoline became higher. It had a negative effect on truckers, but those people, who have their work close to their homes, did not suffer from the inflation. When the price for some goods becomes higher, it means that someone will get an income for it. In this case, inflation is positive for that person. Inflation also has a bad influence on lenders, but it brings benefits for borrowers.

However, inflation lowers the real GDP, and as a result, it has negative effects on people’s standard of living and their employment. Inflation makes the process of planning investment hard and only short-term plans are made. When the inflation is very high, consumers spend a lot of their time on activities connected with inflation, but not on activities, which are productive.

Summing it up, one can say that for some people inflation can mean negative consequences and for others it can be a positive process. However, on the whole, inflation undermines the economy of the country. It makes the planning of investment difficult and companies do not plan to produce some goods for a long period of time. A lot of people spend their time not producing goods and services, but trying not to become the victim of inflation.

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