Causes of inflation

Inflation is a process in which prices for goods and services are increasing, the purchasing power of citizens of the state is reduced. If before inflation has always been a satellite of military conflict, now it is an integral component of a market economy. The reasons for its occurrence are quite a few. Consider them.

Monetary reasons. Inflation occurs when demand exceeds the offer. That is, an excess of money mass depreciates finances. This leads to an increase in the cost of goods and services. There is inflation of demand - production does not have time to ensure increased demand for one product. Also available inflation offer. At the same time, the rise in prices causes an increase in production costs. Inverse inflation Process - Deflation - Possible under the condition of a decrease in the money supply, while maintaining the volume of goods. Monetary factors are an unreasonable emission of money for the needs of the state or budget deficit. In addition, inflation may cause unjustified investment if its volume is many times superior to the budget. Also devalue money is capable of increasing the level of wages in the absence of production growth.

Structural causes. This type of inflation is able to cause an inefficient management system and imbalance in various sectors of the economy. Thus, monopolists who arbitrarily influence prices can cause inflation, since they are not interested in the market competitiveness of their goods. Also, this type of inflation occurs when the conspirass of suppliers and manufacturers comes into force, which increase the cost not on objective market reasons, but solely for their own benefit. Excessive state militarizedness also negatively affects the country's economy. The consumer sector lags behind in development, GDP is increasing without production potential. At the same time there is a budget and commodity deficit.

External causes (external economic conditions) are also able to cause inflation. The impetus for its development may be the inflow of foreign currency in large quantities, and rising prices for imported goods. In addition, inflation contributes to the excess of the level of imports over exports.

Among other reasons experts call and socio-political. There is a specific phenomenon - the "inflation expectations", in which the population expects a rise in prices, and it eventually happens.

It should be noted that moderate inflation if it does not exceed 10% per year, capable of stimulating economic growth. This happens due to the fact that loans are getting cheaper, and this makes it possible to make more investments in the economy. Deep economic crisis for the country can become inflation, which is more than 100% per year.