Project report on inflation

Is inflation good or bad? 

• Inflation, in the basic sense, is a rise in price levels. Economists believe inflation comes about when the supply of money is greater than the demand for money. 

• Inflation is viewed as a positive when it helps boost consumer demand and consumption, driving economic growth.
• Some believe inflation is meant to keep deflation in check, while others think inflation is a drag on the economy.
• John Maynard Keynes said that some inflation helps prevent the Paradox of Thrift—delayed comsumption

Effects of Inflation:-

1. 
   Erodes Purchasing Power
   

This initial effect of inflation is merely another way of expressing the same thing. Inflation is the loss of a currency's purchasing power due to an increase in prices throughout the economy. A cup of coffee used to cost a dime, according to my memory. The cost is now closer to three dollars. An increase in coffee's popularity, price pooling by a cartel of coffee growers, or years of terrible drought, flooding, or conflict in a significant coffee-growing region could all have contributed to the price adjustment. The price of coffee products would rise in those scenarios, but the rest of the economy would be largely unaffected. Only the most caffeine-addled people would see a large deterioration in their total purchasing power, therefore that example would not qualify as inflation.Inflation necessitates a rise in prices across a "basket" of products and services, such as the consumer price index, which is the most often used measure of price changes (CPI). When non-discretionary and impossible-to-substitute products, such as food and gasoline, rise in price, they can cause inflation on their own. As a result, economists frequently exclude food and fuel from their calculations in order to examine "core" inflation, a less volatile measure of price movements.

2. 
   Encourages Spending, Investing
   

When one's purchasing power is dwindling, it's natural to want to buy now rather than later. Cash will only depreciate in value, therefore it's preferable to get your buying done and stock up on items that are unlikely to depreciate. For consumers, this entails filling petrol tanks, stocking the fridge, purchasing shoes for the kids in the following size up, and so on. For firms, it entails making capital investments that would otherwise be postponed under alternative circumstances. When inflation sets in, many investors flock to gold and other precious metals, but the volatility of these assets can negate the benefits of their price protection, especially in the short run.
Over time, equities have shown to be one of the strongest inflation hedges. A share of Apple Inc. (AAPL) cost $29 in current (not inflation-adjusted) dollars at the close of business on Dec. 12, 1980. After adjusting for dividends and stock splits, that share would be worth $7,035.01 at the close of business on February 13, 2018, according to Yahoo Finance. According to the Bureau of Labor Statistics' (BLS) CPI calculator, that figure equals $2,438.33 in 1980 dollars, representing an 8,346 percent real (inflation-adjusted) increase. 2 Let's pretend you buried that $29 in your backyard instead. When you dug it up, the nominal worth would have remained the same, but the purchasing power would have dropped to $10.10 in 1980 values, a 65 percent devaluation.

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