Inflation is commonly understood as a situation of substantial and rapid general increase in the price level and consequent fall the value of money over a period of time. Inflation means persistent rise in the general level of prices. Inflation is a long term operating dynamic process. By and large, inflation is also a monetary phenomenon. It is usually characterized by an overflow of money and credit. In fact, the root cause of inflation is the expansion of money supply beyond the normal absorbing capacity of the economy. The behavior of general prices is measured through price indices. The trend of price indices reveals the course of inflation or deflation in the economy.
Read More about Inflation:
- Causes and Effects of Inflation
- The Stages of Inflation
- Inflation in a Developing Economy
There is no generally accepted definition of inflation and different economists define it differently.
- According to Crowther, “Inflation is a ‘state’ is which the value of money is falling i.e. the prices are rising.”
- According to Milton Friedman, “Inflation is always and everywhere a monetary phenomenon.”
- According to John Maynard Keynes, “Inflation is the result of the excess of aggregate demand over the available aggregate supply and true inflation starts only after full employment.”
- According to Paul Samuelson, “Inflation occurs when the general level of prices and costs is rising.”
- According to Silverman, “Inflation is the name given to the expansion of the money supplies whether in currency or credit in the excess of the amount justified by the government for the trade.”
- According to Arthur Cecil Pigou, “Inflation exists when income is expanding more than in proportion to the income earning activities.”
- According to Hanson, “Inflation is present when the volume of purchasing power is persistently running ahead of the output of goods and services so that there is a continuous tendency for prices both for commodities and factors of production to rise because the supply of goods and services and FPO’s fail to keep pace with demand for them.”
- According to Ackely, “A persistent and appreciable rise in the general level or average of prices.”
- According to Meyer, “An increase in the prices that occurs after full employment has been attained.”
- According to Coulbourn, “In inflation, too much money chases too few goods.”