My OperaCauses of Inflation
Monday, September 5, 2011 9:48:29 AM
Inflation has been one of the most noticeable problems of every economics. So what elements can cause this problem in almost every country in the world?
Firstly, money is the trouble. If a government have money printed in a large quantity to deal with many economical crises within its country, there will be inflation.
The second cause of inflation is the costs of production. This is the result of the first element, money surplus. And therefor, people must rise their products prices to maintain profit margins. If this happens, companies must rise wages in workers' demand and then companies usually chose to pass on those costs to their customers. So there we have inflation.
The next thing, inflation can also be caused by national or international debts. This mostly happens in countries that are heavily dependent on foreign imports (raw materials, goods, commodities, etc) and fund raiser. The decrease in the exchange rates happening in the import and export processes and the increase in the interest rates caused by borrowing money will obviously lead to inflation.
Finally, high taxes governments impose upon consumer products is also one of the causes of inflation. They are cigarettes, alcohol, fuels and VAT, etc that are imposed with high taxes. The higher the taxes are, the more consumers be burdened from suppliers. But the most remarkable thing here is that even if the taxes go down, prices of production remain the same if not increase.
In short, inflation is the very problem that almost every country has to face with. But the weaker an economic growth a country has, the more higher inflation rate it may get.
Firstly, money is the trouble. If a government have money printed in a large quantity to deal with many economical crises within its country, there will be inflation.
The second cause of inflation is the costs of production. This is the result of the first element, money surplus. And therefor, people must rise their products prices to maintain profit margins. If this happens, companies must rise wages in workers' demand and then companies usually chose to pass on those costs to their customers. So there we have inflation.
The next thing, inflation can also be caused by national or international debts. This mostly happens in countries that are heavily dependent on foreign imports (raw materials, goods, commodities, etc) and fund raiser. The decrease in the exchange rates happening in the import and export processes and the increase in the interest rates caused by borrowing money will obviously lead to inflation.
Finally, high taxes governments impose upon consumer products is also one of the causes of inflation. They are cigarettes, alcohol, fuels and VAT, etc that are imposed with high taxes. The higher the taxes are, the more consumers be burdened from suppliers. But the most remarkable thing here is that even if the taxes go down, prices of production remain the same if not increase.
In short, inflation is the very problem that almost every country has to face with. But the weaker an economic growth a country has, the more higher inflation rate it may get.
