Essay On Inflation And Hyperinflation

776 Words4 Pages

Quotes: Inflation is when you pay fifteen dollars for the ten dollar haircut you used to get for five dollars when you had hair -Sam Ewing

Ordinarily, we've heard from our grandparents that we should appreciate money and, accordingly, spend it wisely. At their time, about a decade ago, a house was worth only about a hundred thousand. Unlike now it is for approximately ten million. This seems very shocking; understandably, one might ask how this can happen. The phenomenon for this is explained in inflation. Inflation is known as the rate at which the prices for goods and services are rising; consequently, the purchasing power of a currency falls. Inflation occurs in both underdeveloped and developed countries but it affects developed countries even more. In the past decade, inflation and hyperinflation have occurred more times than it should. This shows the carelessness and the ignorance of the governments and people. We shall discuss
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The decrease in purchasing power. This means that when any three products used to be bought for overall 10, the same three products would now be sold for a total of 20. Basically, the value of money diminishes. Furthermore, Inflation encourages a great deal of spending and investing. When people realize that prices will keep on soaring, it causes a sense of irrationality and panic. Hence, resulting in them spending their money now rather than later, with the sense of intellect that they would be saving money. Likewise, if people require purchasing extra, they will take loans. The banks, knowing people will do so, increase their interest rates. Moreover, it decreases unemployment rates. The organizations decrease salaries and wages. Therefore, they can hire more people. Moreover, the local exchange currency rates reduce. Thus, inflation increases to hyperinflation which is inflation occurring at a very high rate, usually in double
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