Inflation

From Free Talk Live

Inflation is an economic term commonly used to describe a rise in prices over a given period.

Austrian economists generally define inflation as a rise in the money supply and that a rise in prices is an after-effect of this.

Most developed nations calculate inflation by aggregating the prices of a "basket" of commonly purchased goods. This is known as the Retail Price Index or Consumer Price Index. Austrian economists believe that the state shouldn't monitor inflation at all.

Curbing inflation is also a primary goal of monetary policy. The Federal Reserve in the US, the Bank of England in the UK and the European Central Bank in the Eurozone all would raise interest rates to forestall or counter high inflation in their economies.

Low levels of inflation are also one of the four policy goals of macroeconomics. Low inflation is believed to be preferable, as it maintains international competitiveness, is fairer to poorer elements of society who couldn't keep up with higher prices and deters hyperinflation which had catastrophic effects in 1920's Germany.