Life in a market environment involuntarily forces the population to acquire basic economic knowledge, which is really necessary to navigate the current economic situation and take some protective measures in time. One of the most important macroeconomic indicators is inflation and the reasons that have already caused it or may still provoke. Their presence will allow you to take timely measures to preserve your savings.
What is inflation
Inflation, a key indicator of the state of a country's economy, is the depreciation of money when its supply is not met by demand. Anyone can feel it, because its most obvious manifestation is the rise in prices, when for the same amount of money you can buy fewer goods today than a month ago.
There are many reasons for the emergence of inflation, which is characteristic of the economies of the overwhelming majority of countries. These include the monopoly of corporations in one or another area of the economy, but especially in the supply of raw materials. The growth of wages, not supported by the growth of production, as well as the increase in the volume of money that the state prints in order to cover its expenses, can also provoke inflation. A decrease in the level of production of goods and services will also cause their scarce demand among the population, which, in turn, will provoke an increase in prices.
The inflation rate is most often determined by how much the cost of the consumer basket changes - the approved list of goods and services necessary for human life support.
Inflation rates vary. Moderate inflation is considered natural, not exceeding 10% per year; it can even stimulate some economic growth, since loans become cheaper, which allows more funds to be invested in the economy. Inflation is called galloping when it reaches 100% per year. Hyperinflation, in which this indicator exceeds 100%, shows that the state is in a deep economic crisis.
What is a sign of inflation
A rise in prices by itself is not yet a sign of inflation, if GDP grows simultaneously with it. An increase in the money supply also does not always indicate inflation, since it may be due to the accelerated circulation of money. One of the alarming and reliable signs of the beginning of inflationary processes can be considered an increase in the level of prices for goods and services with a simultaneous decrease in the exchange rate of the national currency.
An increase in inflation can be expected with the next indexation of tariffs for electricity and housing and communal services.
The devaluation of the ruble against the more stable exchange rate of the dollar and the euro, especially when it is noticeably accelerating, leads to a rush demand for the currency. The government is forced to take measures aimed at stabilizing the exchange rate of the national currency. If these restraining measures do not help, we can expect an accelerated rise in inflation. Government measures to artificially fix the exchange rate while artificially holding back inflation by not paying pensions and wages to public sector employees, stopping financing of budgetary organizations and paying for government orders are sure signs of inflation.
Since the export of raw materials is Russia's main source of income, the decline in oil and gas prices can also be considered a sign of increased inflation. Prices in the consumer market will grow along with inflation and with the continued growth of the share of imports in the Russian economy with a simultaneous decrease in the country's GDP growth.
