Meaning and Views of Inflation

Spread the love
This article 'Meaning and Views of Inflation' tries to briefly explain the meaning of inflation and different views and perspective of inflation developed over time.

Inflation is generally defined as the rapid, sustained, and large increase in the prices of almost all goods and services over time. Thus, inflation means a substantial and rapid increase in the general price level which causes a decline in the purchasing power of money. It is generally measured by computing the rate of change in a general price index such as the consumer price index (CPI) over time. The article briefly explains the meaning and views of inflation.

Views on Inflation

The major views on inflation are briefly explained below.

Common View

Under the common view, inflation has been defined as a continuous increase in the general price level over time. Thus, inflation is seen as a phenomenon of rising price levels as well as a monetary phenomenon under the common view. Economists like Crowther, Gardner Ackley, and H.G. Johnson regard inflation as a phenomenon of rising prices of almost all goods and services. Similarly, economists such as Friedman, Coulborn, and Kemmerer defined inflation as a monetary phenomenon as they believed too much money creates inflation in the economy.

Keynesian View

Keynes defines inflation as a demand-associated phenomenon and pure inflation occurs only after the full employment of resources in the economy. According to Keynesian thought, inflation is an outcome of the excess aggregate demand over the available aggregate supply and true inflation started only after full employment. In the case of unemployment, if inflation occurs due to increased aggregate demand such inflation is termed semi-inflation. Thus, inflation is a demand-side phenomenon under such a view.

Modern View

The modern approach to inflation observes inflation in a comprehensive and unified manner. It means the modern view states that inflation is not only demand-side rather it may also come from the supply-side or cost-side too. Thus, inflation is a unified phenomenon in which demand and cost elements appear as a part of one integrated cycle that creates inflationary pressure in the economy. This view emerged after the 1960s.

Inflation is an economic term that is statistically measured in terms of a percentage increase in the price index over time. It shows a continuous, rapid, and sustained increase in the prices of almost all the goods and services that typical consumers consume in their daily lives. There is no commonly recognized definition of inflation and different economists express it contrarily. Thus, inflation has several views and representatively, three main views on inflation are there as explained above (Meaning and Views of Inflation)

Leave a Comment

Your email address will not be published. Required fields are marked *

Don`t copy text!