Inflation | Rising in price- Causes, Effects and way forward | CSS essays

In economic ups and downs of the world, inflation or rise hike is considered as a bad news because it directly constrains the financial conditions of the middle or lower class population.

Introduction:

inflation is the enormous effect in rates of economic goods.

Inflation and deflation of price is done due to balance the economy of any state. It has good and worst effects on the financial conditions of middle and lower class people.

Causes:

There are many causes that directly influence the rise and fall in the prices of goods.

Some of which are following:

Less export and higher imports:

All countries of the world are rich in minerals. The country which is deprived of some basic minerals, import from other countries. These imports are directly relating to the exports that one country give in turn of gaining something.

Countries prepare their basic products that may not be manufactured in the others. Some food products may also be imported.

Some countries are rich in wheat, corns, rice and cotton. These are imported to meet needs of food and cloth.

But all countries must produce the best of their home products or crops.

If exports will be higher then there will be no inflation.

Inflation is not only unnecessary for economic growth. As long as it exists it is the enemy of economic growth.

Henry Hazlitt

Mostly, under developed countries face rise in goods prices. Countries that are developed, balance their economy rate.

Economy rates influence people financially. Inflation depress normal social lives of people.

Disasters:

Cosmos is under the effect of many disasters. Countries that are posed to greater disaster may have fallen in economy.

Disasters like heavy rain fall, snow fall, earth-quakes, sand storms and floods can destroy major economic sources.

In the year 2023, Turkey faced earth-quake. Major constructions demolished and a great number of people lost their livelihoods. Government took steps to provide them with sources of their lives.

Pakistan, in 2022, was under flood. Disaster engulfed many lives. A lot of people were helpless. They ran short of their life sources. these types of circumstances lead to inflation.

So to meet the challenges caused of havocs, inflation take place. It compensates the fluctuation in economy.

Deficient industrial production:

Industries base the economy of any country.

Some industries produce the products at broad level to fulfill the needs of other countries and in this way, exports take place.

If by less investment of money or the raw materials essential for production, inadequate production is resulted. In return, prices are increased and inflation is resulted.

Increase in demand:

Some products are demanded highly, when there is greater consumption of a product, the prices are raised.

Increase in population:

Increase in population is another factor of inflation.

Number of people is increased, in turn; consumption of products is also increased.

Goods are imported in higher number, which costs higher. It also put huge economic burden on the social lives of people of all classes.

                      Effects:

Effects social meets of people:

When inflation results, it affects all higher, middle and lower class people.

 Social livings are greatly affected by increase in GDP rate. For instance, if economic ratio is 3% and a person invests his money. He gains 5% of it per month, and then actually because of hike rise, he gains 2% of it.

Effects purchasing power of consumer:

        Increase in prices directly influences the purchasing power of the consumer. inflation suppresses the buying power of consumers.

If a food or medicinal product is increased 15% in its price, it will be difficult for the consumer to buy easily as before.

Inflation puts economic burden on the people simple livings.

Ways forward in case of increase in prices:

  1. Government policies must be a relief for middle class people. So that if increase in prices takes place, they must not feel difficulty in daily social meets.
  2. Products that are consumed faster and are essential like food and medicines must be sold at moderate prices.
  3.  Policies for increasing economic ratio must be followed. If economy is lifted up, it will decrease the burden over people of daily wages.
  4. Government through fiscal policies can fight inflation.
  5. Lot of dependence over IMF can also temporarily relief a state but it burdens the future inflation balancing policies.

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