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Essay on How Inflation Affects Our Economy
The study of inflation requires in fact a study of the whole economy. Inflation is a symptom of disease, of a general breakdown of the economic body. AS a physician cannot thoroughly prescribe for his ailing patient without a complete study of the patient’s entire system--his circulation, respiration, metabolism, psychological setup and so forth, and of the organs connected with these functions—so the investigator of inflation must study the whole economic system. To conclude prematurely that the symptom, inflation, result from a excess of money or from an excess of income, of wages, of diversion of supplies to the war economy, or results from large exports to foreign countries, or from lack of confidence in the currency, or from an inadequate tax system—to conclude without an over-all study that any of these is the cause, is unsound investigation.
The impact of inflation on nation’s economy is undeniable but, in details, there are many types of inflation that should be taken in consideration when discussing inflation particularly its effects on economy. (Almeida, Alvaro; Goodhart, Charles 2001) The theory of the impact of (price) inflation in market economics distinguishes between production (output) and employment, allocation and growth effects as well as income and wealth redistribution effects. Inflation has been the economic problem of our war economy and is an important problem for the postwar economy. Few other economic problems transcend it in importance, in the range of issue raised, or in the degree to which it touches the lives of 130 million Americans, or, for that matter, the lives of people everywhere. It is understandable why the inflationary process was intimately associated with the success of the French Revolution, with the chaotic economic conditions of the American Revolution, with the German economic collapse after World War I, with the disappearance of middle classes......
