Price-Index Inflation Rate Value

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A Price-Index Inflation Rate Value is a price index change rate value (for a price index) that is an increased change rate value.



  • (Wikipedia, 2014) ⇒ Retrieved:2014-7-2.
    • In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. [1]

      It can be defined as too much money chasing too few goods. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. [2] [3] A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the consumer price index) over time.[4] Inflation's effects on an economy are various and can be simultaneously positive and negative. Negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future. Positive effects include ensuring that central banks can adjust real interest rates (to mitigate recessions), and encouraging investment in non-monetary capital projects. Economists generally believe that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. [5] However, money supply growth does not necessarily cause inflation. Some economists maintain that under the conditions of a liquidity trap, large monetary injections are like "pushing on a string". Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities, as well as to changes in the velocity of money supply measures; in particular the MZM ("Money Zero Maturity") supply velocity.[6] [7] However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.[8] Today, most economists favor a low and steady rate of inflation.[9] Low (as opposed to zero or negative) inflation reduces the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reduces the risk that a liquidity trap prevents monetary policy from stabilizing the economy. [10] The task of keeping the rate of inflation low and stable is usually given to monetary authorities. Generally, these monetary authorities are the central banks that control monetary policy through the setting of interest rates, through open market operations, and through the setting of banking reserve requirements.

  1. See: * (Glossary); * (Glossary) * (Glossary) * (Glossary)
  2. Why price stability?, Central Bank of Iceland, Accessed on September 11, 2008.
  3. Paul H. Walgenbach, Norman E. Dittrich and Ernest I. Hanson, (1973), Financial Accounting, New York: Harcourt Brace Javonovich, Inc. Page 429. "The Measuring Unit principle: The unit of measure in accounting shall be the base money unit of the most relevant currency. This principle also assumes that the unit of measure is stable; that is, changes in its general purchasing power are not considered sufficiently important to require adjustments to the basic financial statements."
  4. Cite error: Invalid <ref> tag; no text was provided for refs named Mankiw 2002 22–32
  5. Robert Barro and Vittorio Grilli (1994), European Macroeconomics, Ch. 8, p. 139, Fig. 8.1. Macmillan, ISBN 0-333-57764-7.
  6. Oliver Hossfeld (2010) "US Money Demand, Monetary Overhang, and Inflation Prediction" International Network for Economic Research working paper no. 2010.4
  7. MZM velocity
  8. Cite error: Invalid <ref> tag; no text was provided for refs named Mankiw 2002 pp=81–107
  9. Hummel, Jeffrey Rogers. "Death and Taxes, Including Inflation: the Public versus Economists" (January 2007).[1] p.56
  10. "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others" Lars E.O. Svensson, Journal of Economic Perspectives, Volume 17, Issue 4 Fall 2003, pp. 145–166