What is meant by economic inflation?

Monetary inflation is described as a general increase in prices and a decrease in the purchasing value during a certain period of time, as it occurs as a result of an imbalance between demand and money supply, in addition to changes in the cost of production and distribution or an increase in taxes on products. Therefore, when economic inflation occurs, prices of products and services rise and fall. The value of the currency, which weakens the purchasing power.

Inflation is one of the most common terms in the world of economy, it has led to the collapse and instability of many countries, where the periods of inflation are often long, and if the money supply during it grows more than the size of the country’s economy, then the value of money will diminish and its purchasing power will decrease and rise prices, which could bankrupt these countries.

One of the most important reasons that lead to the emergence of the problem of economic inflation is the increase in aggregate demand, and in this case there is a general weakness in supply and consequently the prices of required products and services rise, and the occurrence of some crises such as high oil prices that increase production costs, while natural disasters The production process is disrupted, which leads to a reduction in the overall supply and thus inflated costs and high prices, in addition to many other reasons such as increasing banking interests that lead to an increase in the money supply, which contributes to the emergence of the problem of monetary inflation and the great disparity between demand and income.