What does Inflation mean?
Inflation is probably the topic that will occupy most people in 2022 and also pose challenges. In many countries, the inflation rate has reached the highest levels for decades.
But although there is a lot of talk about it, most people don’t even know what inflation actually means and what problems it causes. We will clarify all this in this article.
Definition of inflation:
Inflation means that the purchasing power of money decreases. Inflation happens due to price increases for goods. So, you get fewer goods for the same amount compared to the past. Inflation is always expressed as a percentage number.
People generally think inflation is always negative, but that is not true as a general rule. As the saying goes, the dose makes the poison, and the same applies to inflation, which only becomes a problem when a certain level is exceeded over a more extended period.
In most countries, inflation is measured as a basket of goods that reflects society’s average purchasing behavior. This basket differs from country to country but mainly includes food, clothing, housing, health, leisure, and services. When the prices of these goods rise, inflation rises; when prices fall, inflation decreases.
There are three different types of inflation:
- Demand-pull inflation occurs when goods or services are in short supply for various reasons, and the demand is high. As a result, people are willing to pay more money for them, which causes companies to raise their prices.
- Cost-Push inflation: This type of inflation occurs when increased commodity prices force companies to raise prices regardless of demand.
- Built-in inflation: This is hazardous and related to the other two variants. When prices rise, employees demand higher wages, leading to higher costs for companies, who have to raise their prices again, leading to very high inflation rates.
But regardless of what kind of inflation it is, when it gets out of control, it leads to a series of problems. Money is devalued, and so are the savings in your account. Prices rise sharply, which may mean you can no longer afford your standard of living, or even worse; you don’t have enough money to cover your basic needs. And because of restrained consumption, the economy becomes weaker, and there is a higher unemployment rate.
All these issues pose significant challenges to people. But that’s where JAVLIS can help because, with a current annual return of 20%, you not only protect your money from inflation but also earn something.
