Inflacion Economico

Inflation
Inflation

What is Inflation?
What is Inflation?

Inflation is a rise in the general price level and is reported in rates of change. Essentially what this means is that the value of your money is going down and it takes more money to buy things. Therefore a 4% inflation rate means that the price level for that given year has risen 4% from a certain measuring year. The inflationrate is determined by finding the difference between price levels for the current year and previous given year. The answer is then divided by the given year and then multiplied by 100. To measure the price level, economists select a variety of goods and construct a price index such as the consumer price index (CPI1). By using the CPI, which measures the price changes, the inflation rate can becalculated. This is done by dividing the CPI by the beginning price level and then multiplying the result by 100.

Causes of Inflation
Causes of Inflation

There are several reasons as to why an economy can experience inflation. One explanation is the demand-pull theory, which states that all sectors in the economy try to buy more than the economy can produce. Shortages are then created andmerchants lose business. To compensate, some merchants raise their prices. Others don't offer discounts or sales. In the end, the price level rises. Inflationary pressures are a supply-demand imbalance that causes the rise in prices in a market or markets. Inflationary pressures may be of several types: monetary, fiscal, cost, etc... Propagation mechanisms make these price increases were passed on toother markets and repeat over time, allowing inflation to remain, even after they have gone the imbalances that led to it.
CPI1 : A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households.

CPI1 : A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households.

* Monetaryinflation
When faced with a monetary inflation the money supply grows at a rate exceeding the rate of growth of money demand. The main theoretical basis of those applying this theory is the quantity theory of money.
* Monetization of government deficit
When the government runs deficit, can finance it by borrowing, reducing international reserves, or printing money. From the standpoint ofgovernmental accounting printing money to finance the deficit is a loan from Central Bank
* Inflation Demand
Demand inflation corresponds to the demand for goods and services in an economy are greater than the supply thereof. The demand may come from various sectors and for different purposes:
1. On behalf of the families: final products and services, or goods and consumer services;
2. Onthe part of companies to expand their production capacity, or investment;
3. On the government side, which can be either productive investment expenses not directly, increase the overall supply of the country;
4. On the part of the external sector (exports)
* Cost Inflation
Since the final price of goods and services is closely related to costs incurred in production, an increase incosts will generate an increase in their final price. To analyze the causes of rising production costs, it is useful to group the inputs used in categories. Thus we have the inputs used to produce goods and services can be grouped into
1. Labor;
2. Raw materials that can be international commodities such as oil or grains, or commodities whose prices are set in international markets;
3.Machinery, which can also be produced locally or imported;
4. Services, for example, transportation, which in turn strongly dependent on the price of oil

A second explanation involves the deficit of the federal government. If the Federal Reserve System2 expands the money supply to keep the interest rate down, the federal deficit can contribute to inflation. If the debt is not monetized,...