In this article, we are going to discuss an Essay on Inflation, Meaning of Inflation. There are numerous causes of inflation. Although it is frequently stated that a decline in India’s agricultural output led to a decrease in supply, the numbers tell a different tale. You can also find more English essay articles about events, people, sports, culture, technology, etc.
Inflation Essay for Students in English
Essay on Inflation: Inflation is a sustained rise in commodity prices that results in a decline in the purchasing power of a nation. Although inflation is a normal economic phenomenon in any nation, any inflation rate above a predetermined threshold is cause for concern. There are numerous causes of inflation. Although it is frequently stated that a decline in India’s agricultural output led to a decrease in supply, the numbers tell a different tale.
Long and Short Essays on Inflation for Students in English
Long and short Essay in English on the subject of “Meaning of Inflation” for students are provided below. The first essay is a 500-700 word paper on Essay on Inflation. This long essay on Inflation is appropriate for students in Class 7,8,9, and 10, as well as those preparing for competitive exams. The second piece is a 150-200 word brief on Inflation.
Long Essay on Inflation 700 Words in English
Here is a 500-700 word essay on inflation that will help students in Class 7, 8, 9, and 10 as well as those preparing for competitive exams. This long essay on the subject is good for students in grades 7 through 10 and people who want to do well on competitive exams.
Meaning of Inflation:
Inflation and unemployment are the two most discussed topics in modern society. These are the two major issues that plague all economies. Nearly everyone is confident that he understands precisely what inflation is, but it remains a source of considerable confusion because it is difficult to define unambiguously.
Frequently, inflation is defined in terms of its alleged causes. Inflation exists when the supply of money exceeds the supply of goods and services. Or, deficit financing is attributed to inflation. A deficit budget may be financed by the creation of additional funds. However, monetary expansion or a budget deficit may not necessarily result in an increase in the price level. Consequently, it is difficult to define “inflation.”
Inflation is defined as a sustained upward trend in the general level of prices, not the price of one or two specific goods. According to G. Ackley, inflation is “a persistent and appreciable increase in the general level or average of prices.” In other words, inflation is a condition characterized by a rising price level, not a rise in the price level. Inflation is not characterized by high prices but by price increases.
It is an increase in the price level overall. Small or sudden price increases are not indicative of inflation because they may reflect the short-term workings of the market. It should be noted that inflation is a state of disequilibrium characterized by a sustained increase in the price level.
If the prices of most goods increase, then there is inflation. However, it is difficult to determine whether prices are increasing and whether this trend is sustainable. Inflation is therefore difficult to define in a clear sense.
Types of Inflation:
As the nature of inflation varies over time in a given economy, it is prudent to distinguish between different types of inflation. This type of analysis is useful for studying the distributional and other effects of inflation and for recommending anti-inflationary policies.
Inflation may be caused by a number of different factors. Its intensity or pace may fluctuate at various times. It can also be categorised according to the government’s responses to inflation.
a) According to Causes:
i. Currency Inflation:
This type of inflation is caused by currency note printing.
ii. Credit Inflation:
As profit-seeking institutions, commercial banks grant the public more loans and advances than the economy requires. This credit expansion causes a price increase.
iii. Deficit-Induced Inflation:
The government’s budget reflects a deficit when expenditures exceed revenues. To close this gap, the government may request that the central bank print more money. Since the deficit requires the injection of additional funds, any price increase may be termed deficit-induced inflation.
iv. Demand-Pull Inflation:
A rise in the price level results from an increase in aggregate demand over available output. This type of inflation is known as demand-pull inflation (henceforth DPI). But why does total demand increase? This increase in aggregate demand is attributed by classical economists to the money supply.
DPI appears when the money supply in an economy exceeds the available goods and services. Coulborn has described the situation as “too much money chasing too few goods.”
v. Cost-Push Inflation:
Inflation in an economy may result from the general rise in production costs. Cost-push inflation describes this type of inflation (henceforth CPI). Due to price increases in raw materials, wages, etc., production expenses may rise. Since wage rate is not determined by the market, labour unions are frequently blamed for wage increases. Higher wages result in higher production costs.
Consequently, commodity prices are increased. A wage-price spiral is established. However, firms are also responsible for the price increase because they raise prices to increase their profit margins. Consequently, there are two significant CPI variants: wage-push inflation and profit-push inflation. Regardless, CPI results from the shift to the left of the aggregate supply curve.
b) According to Speed or Intensity:
i. Creeping or Mild Inflation:
If the rate of price increases is very slow, we have creeping inflation. The economists have not specified what rate of annual price increase is a creeping one. According to some, a creeping or mild inflation occurs when the annual price increase fluctuates between 2 and 3 percent.
This rate of price increase is considered beneficial for economic development if it is maintained. Others argue that if the annual price increase exceeds 3 percent, it is still considered to be harmless.
ii. Walking Inflation:
If the annual rate of price increase lies between 3 and 4 percent, then we have walking inflation. When moderate inflation is permitted to spread, walking inflation emerges. These two forms of inflation qualify as “moderate inflation.”
A one-digit inflation rate is frequently referred to as “moderate inflation” because it is not only predictable but also maintains the public’s faith in the nation’s monetary system. People lose confidence when a moderately maintained rate of inflation spirals out of control and the economy becomes engulfed by soaring inflation.
iii. Galloping and Hyperinflation:
It is possible to convert walking inflation to running inflation. Running inflation is risky. If left unchecked, it could eventually lead to galloping or hyperinflation. The most extreme form of inflation occurs when an economy collapses. “Double- or triple-digit inflation rates of 20, 100, or 200 percent per year are referred to as galloping inflation.”
iv. Government’s Reaction to Inflation:
Inflationary conditions can be open or concealed. Due to the government’s anti-inflationary policies, inflation may not be an embarrassing problem. For instance, a rise in income causes a rise in consumption spending, which drives up the price level.
If the government counteracts consumer spending through price control and rationing, the inflationary situation may be termed subdued. When government restrictions are removed, suppressed inflation becomes open inflation. Hyperinflation may result from unrestrained inflation.
Causes of Inflation:
Inflation is caused primarily by excess demand or a decline in aggregate output or supply. The former causes the aggregate demand curve to shift to the right, whereas the latter causes the aggregate supply curve to shift to the left. The former is known as demand-pull inflation (DPI), while the latter is known as cost-push inflation (CPI).
Demand-Pull Inflation Theory:
There are two different theoretical approaches to DPI: the classical and the Keynesian.
According to classical economists or monetarists, inflation is caused by an increase in the money supply, which shifts the aggregate demand curve to the right.
Given a state of full employment, classicists held that a change in the money supply results in a proportional change in the price level. Monetarists contend that inflation is always and everywhere a monetary phenomenon.
Keynesians find no correlation between money supply and price level as a cause of an increase in aggregate demand. According to Keynesians, an increase in aggregate demand may result from an increase in consumer demand, investment demand, government spending, net exports, or any combination of the four.
Given full employment, such an increase in aggregate demand results in price inflation. This situation is known as DPI. This can be depicted visually. The level of prices, like the price of a commodity, is determined by the interaction between aggregate demand and aggregate supply.
Causes of Demand-Pull Inflation:
DPI stems from the financial sector. The argument of monetarists that “only money matters” is predicated on the premise that at or near full employment, the excessive money supply will increase aggregate demand, thereby causing inflation.
A rise in the nominal money supply shifts the aggregate demand curve to the right. This allows individuals to maintain excess cash balances. Their spending of excess cash balances causes an increase in prices. The price level will continue to rise until aggregate demand equals aggregate supply.
Inflation, according to Keynesians, originates in the non-monetary or real sector. Following a tax cut, if there is an increase in consumption expenditure, aggregate demand may increase. There could be an independent rise in business investment or government spending. Government spending is inflationary if the government obtains the necessary funds by printing more money.
Cost-Push Inflation Theory:
Along with aggregate demand, aggregate supply also contributes to the inflationary process. Since inflation is caused by a shift to the left in the aggregate supply, we refer to it as CPI. CPI is typically related to non-monetary factors. CPI results from the rise in production costs. The cost of production may increase if the price of raw materials or labour rises.
Companies pass on these cost increases to consumers by increasing the prices of their products. Increasing wages cause rising costs. Cost increases lead to price increases. And again, rising prices cause labor unions to demand higher wages. Consequently, an inflationary wage-price spiral commences. This shifts the aggregate supply curve to the left.
Causes of CPI:
The cost factors are responsible for the price increase. The increase in the cost of raw materials is a significant factor in price inflation. For instance, the government may increase the price of gasoline, diesel, or freight by administrative order. These inputs are now purchased by businesses at a higher price. This exerts upward pressure on production costs.
Moreover, CPI is frequently imported from outside the economy. OPEC’s increase in the price of gasoline forces the government to raise the price of gasoline and diesel. These two essential raw materials are required by every industry, especially the transportation industry. As a result, transport expenses rise, resulting in a general price increase.
Again, wage-push inflation or profit-push inflation may cause CPI. As compensation for inflationary prices increases, labor unions demand higher cash wages. If wage growth exceeds labor productivity, the aggregate supply will shift up and to the left. In order to expand profit margins, firms frequently exercise power by increasing prices regardless of consumer demand.
Changes in fiscal policy, such as an increase in tax rates, exert upward pressure on production costs. For instance, an increase in the overall excise tax on goods of mass consumption is unquestionably inflationary. The government is consequently accused of causing inflation for this reason.
Lastly, production setbacks may result in output decreases. Natural disasters, depletion of natural resources, work stoppages, power outages, etc., may cause a decline in aggregate output.
In the midst of this decrease in output, artificial scarcity of goods created by merchants and hoarders simply exacerbates the situation. Inefficiency, corruption, and economic mismanagement may also be factors. Thus, inflation results from the interaction of numerous factors. An individual factor cannot be held accountable for price inflation.
Short Essay on Inflation 200 Words in English
Here is a short essay on Inflation for students. This short essay on the subject is good for students in grades 6 and lower.
The country was negatively impacted by food inflation in 2013 and 2014 consecutively. In order to recover from the economic growth slowdown, it is essential to reduce the prices of goods. Already, food costs consume 35% of household incomes.
According to economists, the weak monsoon required for the cultivation of summer crops caused inflation. Despite being the second-largest producer of fruits and vegetables after China, India faces shortages due to insufficient cold storage and transport facilities. However, the RBI Governor has pledged to reduce inflation to 8% by 2015. Only if the middlemen in the supply chain are prohibited from engaging in their nefarious activities will all efforts to control inflation be successful. Only then can we avoid losing tomatoes and onions from our dinner plates.
Inflation Essay Word Definitions for Simple Understand
- Output – the material produced or yield, product
- Escalating – to increase something in extent
- Accelerating – to cause faster or greater activity, development, progress, advancement
- Crude – lacking finish, polish, or completeness
- Counterfeiting – made in imitation so as to be passed off fraudulently or deceptively as genuine
- Distort – to give a false, perverted, or disproportionate meaning to, misrepresent
- Crimping – to check, restrain, or inhibit; hinder
- Escalation – increase in intensity, magnitude, etc
- Waning – decreasing in strength, intensity, etc
- Revival – restoration to life, consciousness, vigour strength, etc
- Nefarious – extremely wicked or villainous
