What is inflation?

the simplest common definition of inflation is the increase in the price of goods you need to pay. In other words, it is "the purchasing power of money in your hand is declining". "Inflation" was originally used to refer to the increase in the amount of money in the currency circulation system. However, many economists call this situation "currency inflation" to distinguish it from "price inflation". \xd\ Technically speaking, "price inflation" means that commodity prices rise or it takes more money to buy the same commodity. "Currency inflation" is the price increase caused by the increase of money supply, which is called the hidden tax imposed by the government on domestic consumers. It is generally caused by the government printing too much money, and the actual currency in circulation exceeds the actual demand. With the increase of money supply, the real purchasing power of the money has declined. The government can spend the newly issued currency at the old value in advance, and consumers find that the currency in their hands is far less valuable than before. This process usually takes 18 months to 2 years to recover. At present, most economists believe that "currency inflation" is an important reason for "price inflation". However, money is not the only measure of "inflation". Now, many economists divide "inflation" into cost-driven inflation and demand-driven inflation according to different causes. \xd\ Cost-driven inflation: This is caused by the sudden increase of production costs and the decline or stagnation of consumers' demand for products or services. This extra cost or additional cost will be transferred to consumers in the form of rising retail prices. \xd\ Demand-driven inflation: Simply put, there is too much money and too few commodities. This situation is generally due to the reduction of supply, or the whole economy needs more goods or services than in reality. As a result, prices will rise until the new supply is enough to meet the needs of society. This kind of "inflation" mainly occurs in rapid economic growth or developing countries.