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Word Count: 1,210
Inflation in economics is used to describe an increase in the value of money in relation to the goods and services it will buy Inflation is the sustained rise in the aggregate level of prices measured by an index of the cost of various goods and services Repetitive price increase cause the purchasing power of money and other financial assets with fixed values creating serious economic uncertainty Inflation results when actual economic pressures anticipation of future developments cause the demand for goods and services to exceed the supply available at existing prices or when available output is restricted by undecided productivity and marketplace constraints Constant price increases were historically linked to wars poor harvests political upheavals or other unique eventsExamples of inflation have occurred throughout history but detailed records are not available to measure trends before the Middle Ages Economics historians have identified the 16th to early 17th centuries in Europe as a period of long-term inflation Major changes occurred during the American Revolution when prices in the US rose an average of 85 percent per month and during the French Revolution when prices in France rose at a rate of 10 percent per month Theses relatively brief events were followed by long periods of alternating international inflations and deflations linked to specific political and economic actions The US reported average annual price changes as follows Consumer prices accelerated during the World War 11 era rising at an average rate of 70 from 1940 to 1948 and then stabilizing from 1948 to 1965 when annual increases averaged only 16 percent There is various kind of inflation When upward trend of prices is gradual and irregular averaging only a few percentage points each year inflation is not considered a serious threat to economic and social progress It may even stimulate economic activity The illusion of personal income growth beyond actual productivity may encourage consumption housing investment may increase in anticipation of future price appreciation business investment
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