Essay on Inflation, types of inflation, causes of inflation for students and children for class5,6,7,8,9,10,11,12 CBSE, NCERT, for government exam students, Ielts exam
Essay on Inflation
Inflation has become a very common issue in our society. The persistent increase in the general price level of a country is known as Inflation such as kitchen items, food, medicine, needs, etc. Inflation is defined as a rise in the prices of goods in a country that reduces the purchasing power of its citizens.
Hoarding is also responsible for inflation, there are many negative effects of inflation on our society and economy. although inflation is a part of the normal economic development of any country, any increase in inflation above a pre-determined level is a cause of concern Inflation causes poverty Poor people to suffer the most from inflation there are certain solutions to remove inflation. government should keep on checking the prices of things regularly.
During natural calamities like floods, heavy rain, snow, and earthquakes the production of goods and services decreases considerably which further limits the supply post and hence causes price rise. Any change in the price of fuel immediately impacts the price of food items since most of them are dependent on transport inflation, in short, is too much money chasing too few goods.
The poor people suffer the most from inflation. Inflation causes dreadful impacts on the economy of a country. Inflation can do things in a country’s politics that even powerful opposition leaders. Inflation is a very serious and complicated phenomenon. A high population growth rate usually leads to high prices in overpopulated countries.
In fact high rate of population growth imposes rising pressure on demand not only for money but for output also, They raise the price only to get maximum benefit and so they try to change lots of money from the customer as much as possible. low production of food items is a major cause of inflation as there is no simple cause of this high problem in our society, there is no simple cure.
An increasing population and increasing amounts of goods cause the price of commodities to rise. A drought or flood is enough to make changes in prices and the demand for goods and services also increases. Commodities such as fuel, and petroleum, which are imported to a large extent are subjected to greater prices than other commodities. A price hike or price rise has both economic and political consequences ordinary people are most commonly and severely affected because of price hikes.
Types of Inflation:-
・Creeping inflation
・Walking inflation
・Running inflation
・Galloping inflation
・Hyperinflation
・Demand-pull inflation
・Cost-push inflation
・Depreciation inflation.
・Wage push inflation
・Stagflation
・Deflation
Examples of inflation occur in our society
・When the prices rise less than 3% per year this inflation is good and safe for economic growth this is known as creeping inflation.
・When the price rises from 3 to 4% per year this is known as walking inflation.
・When prices rise by more than 5 to 9 % in a year is known as running inflation.
・When price rises by more than 10% or more in a year is known as galloping inflation.
・When the rise by 100% in a year is known as hyperinflation.
・A good economy: When economic growth is good then there’s more money in thousands of people who can spend it on different items. then the demand and supply also increase when demand increases prices of goods and services also increase. this is known as demand-pull inflation.
・Increase in prices of raw materials: If the price of wheat and rice increases due to the bad monsoon season or tax increase by the government in raw materials then the manufacturer has to increase the prices too to make profits since manufacturing them would be costlier. this is known as cost-push inflation.
・Currency depreciation: printing more notes by the government leads to the currency losing its value. this is known as currency depreciation inflation.
・Increases in employee salaries: When the company or government raises the salaries of their employees then they have to increase the price of their products as well to be able to still make profits this is known as wage push inflation.
・Unemployment, no consumers, and persistent prices are known as stagflation.
・Deflation general decline in prices for goods and services is known as Deflation.
Why does Inflation occur? What are the main reasons for Inflation?
・There are many causes of inflation.
・Decline in purchasing power and the value of money.
・Hoarding by traders.
・Hoarding by consumers.
・Shortage of supply of factors
・Inflation causes Poverty and starvation in the country.
・When there’s inflation, people stop purchasing nonessential items this is because prices rise instantly, and salaries do not rise so quickly that people who are employed in these sectors can lose their jobs.
・Low production of food items is a major cause of inflation.
・Inflation occurs when the demand is more than the supply of goods and services.
Conclusion
In conclusion, Inflation is a natural occurrence in every economy, but individuals and businesses. It can decrease the purchasing power of consumers and lead to decreases in economic growth
How do we control inflation?Measures to control inflation
Monetary measures
1. Control over money:- It is suggested that to check inflation, the government should improve strict restrictions on the issue of money by the bank.
2. Credit control:- Banks should pursue a credit contraction policy.
3. Demonetization of old currency:- When inflation assumes a dangerous proportion, the govt. demonetizes old currency and issues new currency. however, the government may allow a limited amount of old currency to be exchanged for new currency.
Fiscal measures
1. Decreases in public expenditures:- One of the main reasons for inflation in our society is excessive public expenditure, it is therefore, suggested that the government should drastically scale down its non-expenditure.
2. Increase in public debts:- To reduce public expenditure, the private sector’s purchasing power must be mopped up by public borrowing. It can be done through the scale of debentures and bonds.
3. Delay in the payment of old debts:- Payment of old debts that are full due should be postponed for some time so that people may not acquire extra purchasing.
4. Increase in taxes: The government should impose new taxes and raise rates of old taxes. however, care should be taken that taxes do not have any adverse effect on production.
5. Overvaluation of money:- It has been mentioned earlier that devaluation accounts for inflation. To correct this situation it is, therefore, essential to over-value the money.
6. Less deficit financing: The government should eschew deficit financing as far as possible. it should reduce non-essential expenditures to a minimum and increase its revenue resources. It should have balanced budgets.
Other measures
1. Increase in production:- One of the major causes of inflation Increase in production is the most effective and direct method of checking inflation.
2. Proper commercial policy:- In order to increase the supply of goods government should pursue proper commercial policy which impacts more demand and export.
3. Price control and rationing:- Price control deters the industrialists from raising the prices of goods arbitrarily. The rationing system enables all consumers to get their essential requirements at good fair prices.
4. Encouragement to savings:- During inflation, the government should come out with attractive salary schemes. It may resort to a compulsory saving scheme or issue more-year bonds to promote savings in the country.