What is Inflation?

Last updated on: June 7, 2011 at 7:00 am by Tim

What is Inflation? 2011-06-07T07:00:08-05:00 Tim

LOGO Patheos Explore the world's faith through different perspectives on religion and spirituality! Patheos has the views of the prevalent religions and spiritualities of the world.

You’ve probably heard that inflation is defined as “the gradual increase in the price of goods over time.” Sounds like a simple definition of inflation, right? Well, not quite. The gradual rise in price is only one part of inflation. Think of the rise in price as the ‘second half,’ ‘part II’ or ‘the symptom’ of inflation.

Ok…so it doesn’t really define inflation then, does it? Let’s see what Webster’s dictionary defines inflation as:

“a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services”

Here’s the missing piece! Inflation happens because of an increase in the supply of money. The more money that’s created, the less your dollars are worth. That what causes your dollars to lose value – that’s what is behind the word inflation.

How To Cure Inflation

Milton Friedman, one of America’s greatest economists and author of Free to Choose and Money Mischief, defined the cure of inflation to be this:

The only cure for inflation is to reduce the rate at which total spending is growing.” The side effect to his suggested fix is this: “There is no way of slowing down inflation that will not involve a transitory increase in unemployment, and a transitory reduction in the rate of growth of output. But these costs will be far less than the costs that will be incurred by permitting the disease of inflation to rage unchecked.”

I hope this helps as you to understand inflation. We all feel the symptoms of inflation, but understanding the cause and cure of inflation is often left out of the conversation.

Your thoughts?

Faith and Economics

Previous Post

June 6, 2011

12 Money Saving Travel Tips

Next Post

June 8, 2011 What is an Emergency Fund?

Browse Our Archives

Select a Category ALL Bible and Money Biblical Perspective Book Reviews Budgeting Business Corner Churches and Pastors Debt Encouraging Scriptures Entrepreneurship Faith and Economics Family and Money General Personal Finance Giving Inspirational Quotes Investing Making Money Other Personal Finance Retirement Reviews Round Up Saving Self-Improvement Taxes Uncategorized

Select a Month January 2019 November 2018 October 2018 September 2018 August 2018 July 2018 June 2018 May 2018 April 2018 November 2016 October 2016 May 2016 March 2016 February 2016 January 2016 January 2015 November 2014 October 2014 August 2014 April 2014 March 2014 January 2014 December 2013 November 2013 October 2013 August 2013 July 2013 June 2013 May 2013 April 2013 March 2013 February 2013 January 2013 December 2012 November 2012 October 2012 September 2012 August 2012 July 2012 June 2012 May 2012 April 2012 March 2012 February 2012 January 2012 December 2011 November 2011 October 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April 2011 March 2011 February 2011 January 2011 December 2010 November 2010 October 2010 September 2010

TAKE THE

Religious Wisdom Quiz

Who said, "What must I do to be saved?"

Select your answer to see how you score.

The Philippian jailer Nicodemus Zacchaeus Peter