What Are the Harms of Inflation?
Inflation basically arises depending on 2 factors. These factors are demand-pull inflation and cost-push inflation. In the economy, if the demand created by consumers, companies, and the government exceeds the amount of goods and services offered to the country's market, inflation naturally occurs. Inflation occurring in this way is the most common and most fundamental reason for inflation. Cost-push inflation, another type of inflation, is related to the cost increases faced by the producer. For example, if taxes, oil prices, wages, and raw material prices show a certain increase, the producer's cost expenses also increase, and inflation occurs again.
How Can Inflation Be Stopped?
Ultimately, the increase in inflation mainly stems from demand exceeding supply or cost increases. Printing money to finance the public deficit is also one of the detailed reasons for inflation. Low inflation also leads to low interest rates. Low interest rates lead firms to focus on activities. Such investments lead to production, and production leads to an increase in employment and income generation. Low inflation always creates a positive and encouraging environment for production.
