Question: What is Inflation?
Answer: To understand inflation, we first must understand what the word means. The Economics Glossary defines Inflation as:
Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole.
A similar definition of inflation can be found in Economics by Parkin and Bade:
Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability.
Why Inflation happen?
inflation is caused by a combination of four factors:
1. The supply of money goes up.
2. The supply of other goods goes down.
3. Demand for money goes down.
4. Demand for other goods goes up.
How to control inflation especially individually, you must cut expenses, cut cost, budget your expenses, that helps you save more money than before. But how to overcome the infaltion?
To control and overcome the inflation is 2 different thing. To overcome inflation your must be wealthy. In other word you must much more richer than you are now. When you are rich you don't care much if the price of petrol goes up. Or the grocery prices go up. You still have much money.
So you don't care much about prices because you can afford them, not a burden anymore.