The Basic Concept and Pattern Analysis of Inflation

definition

The phenomenon and process of a comprehensive and sustained rise in the price level over a certain period of time.

requirement

1. It does not refer to the increase in the price of individual goods or services, but refers to the increase in the weighted average price of all goods and services. Changes are usually observed through the deflator of the consumer price index, the producer price index, and the GDP.

2. It does not refer to a one-time price increase that stops, but refers to a situation where prices continue to rise for a certain period of time. If prices rise one month and fall the next month, it cannot be called inflation.

form

1. Demand-led inflation: This is caused by the fact that the total demand in society exceeds the total supply that society can provide.

2. Cost-driven inflation: For example, trade unions demand excessive wages, OPEC deliberately raises oil prices, etc., and the general price level continues to rise by a large margin due to cost factors.

3. Asset inflation: refers to the inflation of asset prices such as stocks, real estate, and art that deviates from fundamentals, often referred to as a "bubble" phenomenon. For example, in CXMForex PlatformWhen observing changes in financial assets through other channels, it is necessary to pay attention to such risks.

4. Stagnant inflation: refers to the phenomenon of high unemployment coexisting with high prices. During periods of high inflation, due to excessive government intervention, the price system cannot function properly, the labor market efficiency is reduced, and the natural unemployment rate is pushed up.

5. Hyperinflation: refers to the phenomenon in which the price level rises at an extremely high rate.

6. Import inflation and export inflation.

7. Pure inflation and non-pure inflation.

impact

1. Redistribution of income and wealth

2. Distortions in resource allocation

3. Stagnant economic growth

4. Impact on economic stability

5. Social and political instability