What is the Inflation Rate?

The inflation rate is the percentage change in the general price level, which is usually calculated on an annual basis. It compares the year under study to the base year, which is usually the year preceding the one for which inflation is being studied. The weighted average of prices is determined by the weighted average of the prices of goods and services in the economy.

What might be the rate of inflation?

Mainly, we divide the inflation rate into positive and negative inflation. If we talk about negative inflation, it has its own name and it is deflation. The phenomenon of deflation is not often encountered, and if it only appears, it is usually not long. Positive inflation, on the other hand, is simply inflation, which however, is still divided into creeping, rolling, galloping and hyperinflation.

What should the inflation rate be?

Opinions on the subject really vary, and depending on the economic school, a different rate is desired. For some it will be deflation, for others zero inflation, i.e. 0%, while there are also representatives of the thesis that inflation should be positive, but at a minimum level, i.e. creeping. However, all are unanimous in the view that neither should there be galloping inflation, nor hyperinflation, as this is a very difficult situation with serious socio-economic consequences.

What are the causes of inflation?

Among the causes of inflation, an increase in money supply, an increase in aggregate demand, an unbalanced state budget, or a defective structure of the economy are specifically cited. Since state structures largely influence the rate of inflation, it is the National Bank of Poland that is responsible for its appropriate level.

What are the effects of inflation?

The most important effects of inflation include an increase in the general price level of goods and services in the country, which is also due to reduced value of money. The effects are most often mainly felt by ordinary citizens.

What is deflation?

Deflation is a situation in which inflation is negative. In practice, this means that the value of money increases over time. This is not a good situation in the economy, as it leads to a drastic reduction in spending.