Inflation rate is only an indicator, there is no best, it only applies to one country. Due to different national conditions, the inflation rate in developing countries is generally high, such as India and Russia, which are over 8%, and Brazil is 14%. The inflation rate in developed countries is usually very low, because their development potential is limited under the current scientific and technological conditions. Therefore, there is no single level of inflation rate, but it should conform to the actual situation of a country.
The effect of inflation
Create the illusion of strong short-term market demand.
A large number of printed banknotes quickly flow into the market through various forms, and it is inevitable to buy more products. In which industry, products in which industry will be in short supply, and the demand for related products is also very strong. The short-term investment of a large amount of funds in steel and Gong Ji has caused the demand for steel. With the increasing demand for cement, more people and investment are needed to invest in this industry. Once the production capacity is too large in the short term, such industries will prosper in the short term and then close down.
2. The measurement standard of market economy is not accurate.
Market economy is a contract economy, that is, to act according to the contract. But only when the currency is stable can the signed contract be meaningful. Due to inflation, the monetary value of measuring value is constantly changing, and many contracts have become waste paper. Originally, under the condition of stable currency, this was a fair deal and a win-win situation. Currency instability will lead to unfair distribution of benefits. If you don't break the contract, the cost of raw materials and labor will rise. Consumer places will lose money if they don't raise prices. Some people don't raise prices, which will lead to vicious competition. Employees who don't get a raise are dissatisfied, and bosses who get a raise lose money.
3, causing a lot of unemployment.
When inflation, people tend to be impetuous. Many industries are easy to make money because of strong short-term demand, which makes many people in traditional industries want to squeeze into hot and high-paying industries. Many people in traditional industries want to change jobs. Those who don't want to change jobs want a raise. The price of products in traditional industries rises slowly, and when wages rise, they lose money. If they lose money, they will close their doors, resulting in less work. The constant closure makes it more difficult for naked resignation people to find jobs, which will lead to a large number of unemployment.
4. The supply of social demand is unbalanced.
When people lose trust in money, they will look for something in kind to fight inflation. However, the ability to supply goods normally is limited and orderly. No inventory, lowest cost. When people hoard, demand will rise and fall. For some time, demand will be in short supply. In a period of time, there will be oversupply, inventory and logistics, and the cost will lead to imbalance in the types of products supplied, which will eventually be destroyed by normal production capacity. Balanced and continuous production is the best living condition of enterprises. Surplus crises such as milk pouring will appear.
5. Social crisis.
Once people don't want to hold some paper money and convert it into gold or other countries' currencies, it will lead to many social crises. Previously, the ruble was changed from 1 to $2, but later it lost confidence and was changed from 4000 rubles to 1 dollar.
CPI (Consumer Price Index) is the most common, closest and most relevant indicator to measure the inflation rate, and it is also a macroeconomic indicator reflecting the price changes of consumer goods and services purchased by families.
CPI is calculated by regularly collecting the prices of consumer goods and services in the market (specifically, food, alcohol and tobacco, articles, clothing, household equipment, medical care, personal goods, transportation and communication, entertainment, education, cultural goods and services, housing, etc.). ). Assign weights according to local residents' habits, reflecting the price changes of a basket of products related to residents' consumption.
Can CPI reflect inflation more accurately? The answer is yes. Even in economics, CPI overestimates inflation, because CPI is calculated according to the fixed weight of a basket of products, and consumers often choose other substitutes with lower prices when facing the price increase of a project. For example, when the price of pork rises, residents can choose to reduce the consumption of pork and increase the consumption of beef, mutton and chicken.