Overview of Inflation

Inflation refers to an increase in prices and a fall in purchasing power. When there is inflation, your money can buy less stuff. In recent years, many countries have experienced high inflation, impacting economies and people's lives. The causes of inflation can come from both the demand and supply sides. If there are more currency units without a significant increase in the production of goods and services, prices will rise. For example, an increase in the money supply without a corresponding increase in production can lead to higher prices. Deflation, on the other hand, encourages saving and can result in less investment since prices are going down. High inflation reduces the value of wages and makes it harder for people to afford things. Some countries facing high inflation currently include Venezuela, Lebanon, Argentina, and Turkey. During periods of high inflation or hyperinflation, people try to exchange their money for a more stable currency or precious metals, invest in assets that grow faster than inflation, and buy things earlier to avoid higher prices in the future. In extreme cases, people might leave their countries in search of more stable situations.