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  #1  
Old January 21st, 2011, 07:08 PM
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Why is inflation taken as a fact of life?

Really, I really want to ask... why? It's as if it is built into the economy of a country. Salaries have a built-in raise to accommodate inflation. Why? Why can't prices be kept at a steady rate... or deflated? Will it cause problems? Why can't we go back to an economy where a naya paisa will have good value... or a penny for that matter?

Will this mean rehauling the whole system... all around the world? Is this the armegeddon we are expecting in 2012
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Old January 21st, 2011, 10:11 PM
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Re: Why is inflation taken as a fact of life?

Because inflation is part of economy, it is market driven, more wealth is generated every hour, value of a plot increases suddenly in India if it gets connected by new road, wealth increases liquidity in market, it shoots the prices upward.

Economics further says about opportunity cost, it means the time that we waste on replying each other can be channelised to generate money by any other activity

But I donít know what is that other activity

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Old January 21st, 2011, 10:35 PM
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Re: Why is inflation taken as a fact of life?

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Why is inflation taken as a fact of life?
because it is.
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Old January 22nd, 2011, 12:03 AM
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Re: Why is inflation taken as a fact of life?

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Originally Posted by Sane Less View Post
Really, I really want to ask... why? It's as if it is built into the economy of a country. Salaries have a built-in raise to accommodate inflation. Why? Why can't prices be kept at a steady rate... or deflated? Will it cause problems? Why can't we go back to an economy where a naya paisa will have good value... or a penny for that matter?

Will this mean rehauling the whole system... all around the world? Is this the armegeddon we are expecting in 2012
They do try to control inflation by open market operations and expansionary or contractionary measures but the problem with economy is that it is a highly complex machinery...there are several levers and toying with any one of that can result in different complication...

In Soviet Russia, they tried to experiment once to run the economy without money in 20s, needles to say that they later relaized that even in Soviet russia money runs the economy.
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Old January 22nd, 2011, 10:13 AM
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Re: Why is inflation taken as a fact of life?

Population grows, resources dont keep pace, demand rises, supply goes down, price rise occurs, you have inflation.
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Old January 22nd, 2011, 10:38 AM
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Re: Why is inflation taken as a fact of life?

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Originally Posted by echarcha View Post
Population grows, resources dont keep pace, demand rises, supply goes down, price rise occurs, you have inflation.
That is one type of inflation... then there is cost-push inflation, where you can make the prices shoot up... and then there is inflation because of snags in the mechanism... and not all inflation is bad... a little inflation is healthy for economy... it is a sign of growing economy and people having more expendable cash with them. And this may lead to productive investment and conducive atmosphere for more investment.
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