Most of the inflation we have today is caused by the federal reserve/govt. When they want something, they just print more money and that makes the value of all previously existing money go down. It is, in fact, hidden taxation without representation.
An inflation of currency means the increased supply of money to such an extent that general prices of commodities are raised. Its effects are:
1 it increases the profits of organizations: inflation causes arise in the cost of articles but their cost price does not rise as quickly as their sell prices. Wages, interest and rent do not rise as soon as there is a rise in price. Thus, in the beginning the producers gain enormous profits. The scale of business is enlarged and the industries develop.2 it may help increase productivity: if the rise in price is little, so that there is no scope for new factors of production to be employed, the old ones will be made more efficient. New methods of production will be introduced.
3 creditors stand to loss: the value of money falls therefore, the creditors will get the same amount of money from their debtors. But now the purchasing power of the money has been reduced so that they will be getting less commodities and services in exchange of the given amount of money than before.4 the debtors gain: during the period of inflation on account of rise in prices the debtors can repay their debts more easily than otherwise
Demand induces and supply said
State and explain four consequences of inflation in an economy