Questions on Inflation....

Q. What does the inflation rate soars mean?

A. The Inflation Rate Soars means the rate of increase in the price of goods and services over a given period of time increases tremendously.



Q. How inflation rate is calculated?
A. Inflation is measured by calculating the percentage rate of change of price index,

which is called the inflation rate. The rate of inflation is usually expressed in annualised term,

though the measurment periods are usually different from one year.

Inflation rate= p - P /P *100

i.e, p minus P devided by P into100.

Where, p= current average price level, P= price level a year ago.

Q. Disadvantages of inflation?

A.Inflation is the decreased value of money.

if inflation goes up it means that the prices of goods also go up. this may lead to workers demanding higher wages and result in less profit for the business.

also means people will not have the the same amount of money to spend and this could lead to a decrease in sales.(less profit)

Q. Is inflation harmful?

A. Its like food, you eat too much you get sick and if you eat too little you get sick.
Too much inflation will ruin the economy but small levels of inflation will spur growth.

Q. What is cosmic inflation?

A. There are a number of reasons to suspect that the universe started from a point:

1) All the distant galaxies are headed away from us, so 13.7 billion years ago they were in one spot..

2) The macro-universe is no different on opposite sides. Nothing has had the time to smooth out both sides.

3) The Microwave background noise is everywhere, and it is an echo of the "Big Bang" (sort of...).

So how did the universe get from a tiny point to what we have now? Well the best theory is that in the first second of the Big Bang, SPACE (not matter) inflated tremendously fast.

This is a complicated subject, but much is know about what happened, and many pieces of evidence point in this direction.

Q. What is the different between inflation and unemployment?

A. The number of people unemployed is the number of people in the country who are out of work and who are available for work at current market wage rates. This can easily be changed to a percentage by relating the number of people unemployed, to the total number of people in the labour force.

Inflation is the general increase in prices over a 12 month period. This is measured by taking weighted averages of all consumer products (weighted on the frquency of purchase) and analysing the trend of overall prices. This is often called the Consumer Price Index (CPI) or Harmonised Index of Consumer Prices (HICP). This shows how much, as a percentage, the general price levels of all consumer goods have changed over the year.

The two have been analysed together using the Phillips curve which shows the rate of inflation plotted against the rate of unemployment.