FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.
FINANCIAL CHRONICLE™

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

LISTED COMPANIES

Submit Post


ADVERTS

Poll

EXCHANGE RATE PREDICTION: 2022

Inflation and how it affect countries Vote_lcap16%Inflation and how it affect countries Vote_rcap 16% [ 43 ]
Inflation and how it affect countries Vote_lcap21%Inflation and how it affect countries Vote_rcap 21% [ 58 ]
Inflation and how it affect countries Vote_lcap30%Inflation and how it affect countries Vote_rcap 30% [ 83 ]
Inflation and how it affect countries Vote_lcap34%Inflation and how it affect countries Vote_rcap 34% [ 93 ]

Total Votes : 277

ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


CONATCT US


Send your suggestions and comments

* - required fields

Read FINANCIAL CHRONICLE™ Disclaimer



Latest topics

» Sri Lanka banks may need more regulatory, accounting forbearance
by CHRONICLE™ Today at 2:05 pm

» Sri Lanka bond yields extend fall on DDR comments
by K.R Today at 10:09 am

» Banking Sector Vulnerability to Domestic Debt Restructuring
by God Father Today at 9:29 am

» Focus on Government controlled entities
by ErangaDS Today at 7:56 am

» Prime Land Foreign expansion-Target Price 18+
by shiraz latiff Today at 1:08 am

» NESTLE Target Price Rs.1500-INVESTMENT IN BUILDING A NEW VACUUM BAND DRYER AT THE STATE-OF-THE-ART FACTORY IN KURUNEGALA.
by shiraz latiff Today at 1:02 am

» PLR (Prime Lands) Next Value counter.. Fair Value Rs 20
by sakuni Today at 12:34 am

» LOLC FINANCE PLC (LOFC.N0000)
by Beyondsenses Yesterday at 9:10 pm

» Palm Oil is going up again
by ErangaDS Yesterday at 3:09 pm

» PMB/PLC/PINS
by ErangaDS Yesterday at 3:05 pm

» The rupee was now ‘heavily undervalued’ based on fundamentals - Central Bank Governor Nandalal Weerasinghe
by K.R Yesterday at 8:58 am

» Shares to Sell
by Tax Wed Nov 30, 2022 5:36 pm

» HAPUGASTENNE PLANTATIONS PLC (HAPU.N0000)
by cheetah Wed Nov 30, 2022 10:10 am

» What will happen tomorrow?
by K.R Wed Nov 30, 2022 7:35 am

» Will anyone else do this? Commercial Bank debentures.
by reyaz Wed Nov 30, 2022 7:18 am

» Billionaire owned listed companies faces insolvency issues in Sri Lanka
by God Father Wed Nov 30, 2022 1:45 am

» Don't Catch Falling Knives!!!
by DeepFreakingValue Tue Nov 29, 2022 10:55 pm

» CIC going to next level
by suku502 Mon Nov 28, 2022 12:13 pm

» CENTRAL INDUSTRIES PLC (CIND.N0000)
by ErangaDS Wed Nov 23, 2022 6:34 pm

» KZOO.N SHAW WALLACE INVESTMENTS PLC TP 10/
by cheetah Wed Nov 23, 2022 11:16 am

EXPERT CHRONICLE™

MARKET CHAT


ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)


CHRONICLE™ YouTube

LATEST TWEETS

You are not connected. Please login or register

FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Inflation and how it affect countries

Inflation and how it affect countries

Go down  Message [Page 1 of 1]

1Inflation and how it affect countries Empty Inflation and how it affect countries Mon May 02, 2022 6:53 pm

CHRONICLE™

CHRONICLE™
Admin

1. What is inflation?

We all care about the prices of the goods and services that we buy. It also matters to us how much prices change over time. And the economy tends to work best when prices are relatively stable. Inflation is at the heart of these issues. But what is it exactly? And what are the reasons for differences in inflation rates across countries and over time?

The next three sections try to answer these questions. Section 1.1 introduces the concept of inflation, Section 1.2 explains cross-country differences in inflation rates and Section 1.3 looks at inflation over time. Each section includes interactive charts that allow you to learn more about inflation statistics.

1.1 What is meant by inflation?

Inflation is a key phenomenon in the economy. But what is it? It is all to do with money and prices.

Each product in the market has a price, which is expressed in money. Without money, products would have to be exchanged for other products based on their “real value”. The real value of a product, also called its relative price, would thus be defined in terms of other products (e.g. a loaf of bread might be exchanged for – i.e. equivalent to – two litres of milk). Money serves as the “unit of account” that allows the real value of every product to be expressed at its “nominal price”. When we talk about prices in the economy, we are referring to nominal prices.

Prices of products can change over time, as both supply and demand change. In the case of supply, a good harvest increases the supply of corn and its price may decrease, while a bad harvest leads to scarce supply and rising corn prices. In the case of demand, fashions and consumption trends increase demand for popular brands and products, which may drive up their prices, while the prices of less popular products may fall.

As well as supply and demand, the amount of money in circulation also has an impact on prices. The greater the amount of money circulating in the economy, the higher the risk of wide-ranging increases in prices. This would change the general price level in the economy. And that is precisely what inflation is about, namely changes in the general price level.

Inflation is the general increase in the overall price level of goods and services typically bought by citizens (or “households”, to use the statistical term). It is measured as the average price change over a given period of time for a basket of goods and services that are typically bought in the economy. In the euro area, it is measured as changes in the Harmonised Index of Consumer Prices (HICP) compared with the same period one year earlier (“year-on-year” changes). See Chapter 2 for details on the HICP.

1.1.1 Why does inflation matter?

Inflation affects us all, because increases in the general price level mean that the value of money decreases. In other words, you need to pay more money than before to buy the same products and services. High inflation is usually bad for individual citizens (or households) because it erodes their “purchasing power”, but it is also harmful for the economy as a whole and can reduce economic activity. Society also suffers because high inflation can increase inequality. Households on low or fixed incomes are often hit hardest because they are less likely to safeguard themselves against inflation.

But falling prices and “negative” inflation rates are not good either. The opposite of inflation is deflation, which is a sustained and general fall in the overall price level. This is just as harmful and costly to the economy as inflation. Continuously falling prices create a vicious circle for the economy. If we expect prices to fall, we tend to postpone today’s purchases to take advantage of lower prices tomorrow. And if everybody does this, the economy could grind to a halt. If businesses are not able to sell their products and services, they may need to lay off staff. When people lose their jobs, they spend even less.

Stable prices are therefore best for the economy, and this is why the ECB and other central banks have the task of maintaining price stability. However, price stability does not mean that prices do not increase at all. Rather, it means a positive but low inflation rate, with small, gradual increases in the general price level.

Price increases should be small enough not to create problems for people and businesses but large enough to create a sufficient buffer for the economy against deflation. For instance, in a severe downturn – what experts call a recession – inflation tends to fall as the economy contracts. And if inflation is already too low when a recession hits, there is a risk that it will fall below zero. In addition, positive but low inflation acts as a buffer for small measurement uncertainties. Hence, by aiming for slightly positive inflation, central banks have a safety margin against deflation.

1.1.2 Inflation statistics

Individual goods and services – and groups of goods or services – have different inflation rates. For an overview of the increase in the general price level, inflation is therefore measured using a shopping basket containing the goods and services typically bought by households.

For example, in March 2022 the euro area inflation rate for “food and non-alcoholic beverages” was 5.7% and the rate for “clothing and footwear” was 2.1%. The overall inflation rate in the euro area was 7.4% in the same month.

You can use the interactive visuals to see the inflation rate for your country and for each category of goods and services. You can also compare inflation rates for different countries and categories.

https://www.srilankachronicle.com

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum