See also: Inflation (homonymy)
One calls inflation a “generalized and durable rise of the general level of the prices”;
Inflation is the “generalized and durable rise of the general level of the prices”, the economist Gregory Mankiw watch whom the agents can hesitate systematically to adjust their prices vis-a-vis inflation when that has a cost, even very weak, for them (the author takes the example of the cost to change the prices on the menus of the restaurants, that it is necessary to make reprint). The agents then adjust the allowance of their resources only with one delay. The author shows that these delays have important consequences on the overall allowance of the factors, leading to important inefficiencies.
The macro-economic point of view: inflation and measurement of the GDPGrowth rate of the nominal GDP = growth rate of the real GDP + Growth rate of the prices
It is a simplified formula, makes some one does not add rates T but one multiplies indices (1+T). For example a rate of 3% results in an index of 1,03)
In practice, the arbitration between the various effects of inflation leads the majority of the economists to estimate that a rate of stable inflation near to the 2% is a sign of good performance of a developed economy.
Psychological inflation and the monetary illusion
One tends to complain about inflation about certain products and nonindustrial services (plumber, baker). However these prices followed only inflation, one believes that the price of the bread for example has increased for twenty years whereas in fact they are the prices of all the other objects which decreased, one thus believes naturally that the price of the bread increased. Indeed all the other products profit from the rise of the productivity (news machines) and the fall of the prices bound, whereas the bread is produced to him always in the same way, with a margin of little thing.
To note in addition that to forget to take account of inflation, for example in the evolution of the incomes, is a cognitive Biais, known of the behavioral economy, called monetary illusion (in consumer goods). The monetary illusion also exists for the goods of capital. For example the consumers are considered richer when the price of their house increases, because they consider the assumption or it would sell it against consumer goods, without thinking that they should then be placed. However, if they sold it, that would cause a drop in the prices, in addition they could not place in a larger house (all prices having increased), if they rented it, they would realize that the rent did not increase as quickly as the real prices, moreover with the rent which they would touch, they could not be placed either elsewhere in a larger house. This is why in the facts, they are not richer. They are victims of the monetary illusion (in goods of capital).
Economic theories of inflationAugust 1st
Austrian SchoolThe Austrian school defines the inflation in a way different from the majority of the economists. According to it, any index of price is arbitrary. This is why, for it, inflation is simply a rise of the money supply higher than the economic growth and deflation a monetary growth lower than the economic growth. For the Austrians for example there N was not least reduction of inflation in the years 1980. Indeed the money supply continued to grow as quickly as in the past. The Austrians are hostile with any private or public monetary creation. They are in favor of a currency goods (for example gold) and of a slow deflation, the constant stock of currency remaining during the economic growth.
In an approximate way, the currency is neutral long-term, but not on the short term.
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