INFLATION - Most people understand that a drastic increase...

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Most people understand that a drastic increase in a country’s money supply will produce inflation. This is because if the monetary supply increases faster than demand, the value of each unit of currency will fall. To put it another way, if the supply of money were to grow faster than the demand for it, the result would be too many ringgits chasing too few goods which is the very definition of inflation. In the world of economics, there are two fundamental terms used to describe the price movements of goods and services over time: inflation and deflation. As investors, it's important to understand the impact inflationary or deflationary times can have on investments too. In economics, there are two ways to describe the changes in the prices of goods and services over time, which are inflation and deflation. Inflation and deflation arise from changes in either the demand side or supply side of the macro-economy. INFLATION is a consistent increase in the price of goods and services over time. During inflationary times, money loses its "buying" or "purchasing" power, and it takes more units of currency to purchase the same units of goods or services. Over time, inflation lowers the value of each unit of currency. Inflation benefits some and hurts others. For example, you borrowed money from your local bank and promised to pay it back over a ten-year period. If inflation were to rise during this term each payment you make to the bank has less purchasing power than it did when you initiated the loan. Hence, inflation is good for the borrower and bad for the lender. A low to moderate amount of inflation is also good for an economy. This is because if consumers believe prices will rise they will purchase now rather than wait and pay more in the future. Therefore, it can be said that inflation helps keep the wheels of an economy turning. Inflation is defined as the rate (%) at which the general price level of goods and services is rising, causing purchasing power to fall. This is different from a rise and fall in the price of a particular good or service. Individual prices rise and fall all the time in a market economy, reflecting consumer choices or preferences and changing costs. So if the cost of one item, say a particular model car, increases because demand for it is high, this is not considered inflation. Inflation occurs when most prices are rising by some degree across the whole economy. This is caused by four possible factors, each of which is related to basic economic principles of changes in supply and demand:-
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Increase in the money supply . Decrease in the demand for money. Decrease in the aggregate supply of goods and services. Increase in the aggregate demand for goods and services. Meanwhile, DEFLATION is a consistent decrease in the price of goods and services over time. During deflationary times, money increases in its "buying" or "purchasing" power, and it takes less units of currency to purchase the same units of goods or services. Over time, deflation increases the value of each unit of currency. Deflation also can be defined as the
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