If inflation is roughly 2% per year, wouldn’t it eventually devalue like the Zimbabwean dollar?
In: Economics
Printing money **IS** inflation. The problem with Zimbabwe was that they printed money WAY faster than their economy did, causing massive price increases. Most countries are still inflating their currency and forcing prices to rise, but at a much slower rate, which is a lot easier to adapt to, although it still devalues any savings or debts being held, which can be a problem.
I need someone to help me out, but i remember learning about this in school many years ago. Vant remember exactly why, but lets say everyone in a country went on a shopping spree.. then lets say everyone refuse to spend anything. these 2 scenarios have oposite effect on inflation. A common strategy where i live, is (or was) increased ammount of tv commercials that promoted saving, or oposite; some kind of spending campaign. This is just one small thing they do ofc. I dont know the english Word for it, but in Norwegian its “motkonjuksjoner”. Maybe something in the ballpark of “anti conjunctions”, tho i might be way off and youll probably find it using the Nor. Version. Sry in case of Norwegian autocorrects. Cba proofreading
No, because, at least in theory, the economy grows and wages increase, and there’s more wealth being created. This means that while things cost more than they used to, people have more money than they used to as well, so it roughly cancels out.
What you’re taking about with Zimbabwe his hyperinflation, where currency rapidly devalues and the economy doesn’t adjust accordingly.
Yes, but it is going to happen so slowly that it isn’t really a concern. $1 being worth $1.02 next year and $1.05 the year after that isn’t a concern because the markets and wages have time to adjust to the inflation. A loaf of bread costing $1 this year and $2 next year isn’t an issue if your wages increase at the same rate.
Hyperinflation – like what happened in Zimbabwe – is a problem because it is happening so fast that the markets _can’t_ adapt. A loaf of bread costing $1 in the morning and $10 in the _afternoon_ is a big problem, because your wages become close to worthless as soon as they are earned.
Yes. Inflation does indeed devalue the money. This is fairly slow but very much real. An American dollar is worth significantly less than it was in the 50s.
you want low inflation like that.
in countries with hyperinflation you could go to work and buy a morning coffee then on the way home the coffee go up in price.
it effects every thing. it makes you rush out and blow your money saving becomes impossible..loans become unprofitable. this collapses economies and why you can see returns to a barter system.
low inflation is good. you get little or no negative effects. while sure things are going up in price saving is still advantageous and investments can pay off.
deflation is bad because then the rich who were able to save end up more wealthy than before. deflation can be ok in short term but in general it’s bad. but not something that normally will happen anywhere anyway.
tldr you want low inflation like 2%
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