Question

Write as much as you know about Inflation rates from finance. How to analyze data from inflation rates?

Answer 1

Inflation rate measures the changing prices, especially analysed on a month to month or year to year basis and is expressed as percentage. It refers to the increase in prices of goods and services of daily used products, essential commodities such as clothing, food, housing, vehicles etc. It analyses the average price change in goods and services.

It affects the purchasing power of the decreasing currency unit as the goods and services gets more in demand. It also effects the cost of living of a country. When inflation rate increases, the cost of living of the citizens also increase, which ultimately results to a decrease in economic growth. Inflation is required in the economy to a certain level to ensure that the expenditure is promoted. The value of money decreases over time, and it is essential for individuals to invest their money, as investing benefits the economic growth of a country. In this case, inflation helps in keeping the money in the country itself by motivating investment.

We can measure inflation by consumer price indices, which depicts the growth over the time of price of commodities and services bought by the consumers. The reason of inflation is an increase in money supply, it can be because of different events and situations. The value of the currency starts decreasing when it is abundant and the currency is not scarce, and not as valuable. Inflation rate over a specific period of time is calculate as the rate of change in the consumer price index.