WORLD HISTORY

Detailed explanation-1: -What creates inflation? Long-lasting episodes of high inflation are often the result of lax monetary policy. If the money supply grows too big relative to the size of an economy, the unit value of the currency diminishes; in other words, its purchasing power falls and prices rise.

Detailed explanation-2: -As an economy grows, businesses and consumers spend more money on goods and services. In the growth stage of an economic cycle, demand typically outstrips the supply of goods, and producers can raise their prices. As a result, the rate of inflation increases. Inflation is a sustained rise in overall price levels.

Detailed explanation-3: -Based on speed, there are 4 different types of inflation – hyperinflation, galloping, walking, and creeping.

Detailed explanation-4: -Inflation occurs when the prices of goods and services increase over a long period of time, causing your purchasing power, or the amount of goods and services you can buy with a single unit of currency, to decrease. In short, inflation means that your money may not be able to buy as much today as it could in the past.

Detailed explanation-5: -When inflation is high, the value of a country’s currency weakens. This is because goods become more expensive, and it becomes less attractive for investors to do business. The inverse is also true.