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CPI Index

Posted by watertree under Economy and finance

Consumer Price Index (Consumer Price Index), the English abbreviation for the CPI, is a reflection of life and related products and services price statistics by the indicators of price changes, usually observed as an important indicator of the level of inflation.

Generally speaking, when the CPI> 3% increase when we called inflation;

When the CPI> 5% increase, we called him serious inflation.

Tags: consumer price index, gt 5, inflation cpi, price statistics, reflection of life

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The cause of inflation

Posted by watertree under Economy and finance

Inflation is the general price level continued to rise. The causes of inflation, which it? Why, then, there will be inflation be? In fact, the causes of inflation are about four points:

(A) Demand-pull inflation

Demand up inflation refers to the growth of aggregate demand caused by the transition of inflation, that is “too much money chasing the size of the cargo”, in accordance with the interpretation of cairns, if aggregate demand is greater than total supply up to the point where, at this time, as a result of labor and equipment have been fully utilized, and thus to further increase production has been impossible, the demand for the transition can cause a general rise in price levels.

Therefore, any increase in total demand of any factors that can be demand-pull inflation caused by the specific reasons.

(B) Promote cost inflation

Tags: causes of inflation, cost of inflation, demand balance, profit increase, wage inflation

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The effects of inflation

Posted by watertree under Economy and finance

What is inflation? Inflation generally refers to notes issued by more than the practical needs of the commodity distribution of the money supply caused by the devaluation of the currency notes, the phenomenon of rising prices. And this is also a direct impact on people’s lives, inflation on the economic life of the consequences is self-evident.

Stability in a small one of the impact of inflation is difficult to renegotiate the price, especially, especially in terms of pay and contract. Therefore, if prices rise slowly, then the price will be related to the adjustment easier. There are a variety of prices would be ’stranded price’, but quietly rising. Therefore, zero inflation (the price to maintain the stabilization) the effect will be to reduce the prices, profits, and employees affected a number of ways to other areas. Therefore, a number of the company’s executive arm, as the moderate inflation for ‘lubrication commercial ship’. Become part and parcel of the pursuit of price stability will be very devastating deflation (lower prices), will lead to bankruptcy and the economic recession (or even an economic slump).

Financial system, as the inflation of ‘potential risks’ for the accumulation of wealth above the savings of the basic investment incentives. In other words, inflation is the market for the time value of money wording. In other words, because a dollar today than a dollar next year, more valuable, so the capital value of the future in economics has been deducted. This point of view of inflation for the capital value of future uncertainties.

Class in terms of low inflation usually increase in economic activity from the previous discount the negative impact. Inflation is usually caused by the Government to increase the money supply policy. Government can do on the inflationary impact of stagnant tax funds. Higher inflation, the government raise the tax burden on the stagnation of funding in order to stimulate consumption and borrowing, on improving the flow of funds rate, inflation has also been strengthened and a vicious circle. In extreme circumstances will be the formation of hyperinflation.

Inflation on the impact of economic life

In the case of inflation, will certainly have an impact on the socio-economic life. If society’s inflation rate is stable, people can be fully anticipated, then the inflation rate on the social and economic life has little effect. In which inflation can be expected under a variety of nominal variables (such as the nominal wage, the nominal interest rate, etc.) can be adjusted in line with inflation, so that the actual variables (such as real wages, real interest rates, etc.) do not change. At this time of inflation on the social and economic life of the only impact is that people will reduce their cash holdings. However, in the inflation rate can not be fully anticipated, the inflation will affect the social distribution of income and economic activities. Because that’s when people can not accurately according to the inflation rate to adjust the various nominal variables, as well as their economic activities to be taken.

(A) In between debtors and creditors, inflation will be conducive to the detriment of creditors, the debtor

Under normal circumstances, borrowing debt covenants are based on the inflation rate at the time of signing to determine the nominal interest rate, so when there were unexpected inflation, debt contracts can not be changed in order to make the actual interest rate has dropped, the debtor to benefit , and impaired creditors. As a result, the loans, especially long-term loans have an adverse impact, so that creditors do not want loans. Loans to reduce it would affect investments, and finally to make a decrease in investment. Healthy Living

(B) Between employers and workers, inflation will be conducive to the detriment of workers, employers

This is because inflation is not expected, the wage increase can not be adjusted in line with inflation, so even in nominal wages in the same or a slight increase in cases, so that real wages have declined. Decline in real wages will increase profits. The increase in profit is conducive to stimulating investment, this is exactly what some economists advocate a moderate inflation to stimulate economic development reasons.

(C) Between the Government and the public, while inflation will be favorable to the government and not conducive to the public

Because of unexpected inflation, the nominal wage increase in the Federation of Hong Kong (although not necessarily able to maintain the original level of real wages), with the increase in nominal wages to increase the tax threshold, there many people entered the higher tax levels, so that makes the Government’s tax increase. However, the amount of public tax increase in real income has decreased. The Government has been that inflation in the tax called “inflation tax.” Some economists say that this is really the government of plundering the public. The existence of this inflation tax is detrimental to the increase in savings, but also affected the private and corporate investment enthusiasm.

Since reform and opening up,America has experienced three times more serious inflation, respectively, occurred in 1980, 1988 and 1994.

Tags: commercial ship, commodity distribution, economic activity, inflationary impact, moderate inflation, what is inflation

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