Thanks to the platform of Hive and Leofinance, I have the opportunity to come into contact and talk with people from all over the world!

Almost everyone will report, either individually or more strongly, how much their lives have changed since the continued increased cost of living! This cost of living is nothing but inflation!

Inflation

Inflation is the continuous increase in the general price level of an economy over a period of time, causing a fall in purchasing power, as each unit of money buys fewer goods and services.

In markets, whether it is for any product or service, the price is shaped by supply and demand! So we have two types of inflation:

Demand inflation

Demand-side inflation is the inflation resulting from an increase in the demand for goods or services. The increase in demand is generally due to:

• Increase in money supply.

• Increase in public spending

• Public expectations for worsening inflation

• Increase in foreign demand for domestic goods

Supply inflation

Supply-side inflation is the inflation that results from a reduction in the supply of goods or services. This reduction is due to:

• Wage growth faster than labor productivity growth
• Increase in earnings greater than increase in return on capital
• Appreciation of imported raw materials
• Increase in indirect tax rates
• Increase in the cost of borrowed funds

Causes of inflation

Iam sure you have read or heard about the central banks, aand all this discussions about the liquidity they put into the markets especially after COVID,which resulted in the crazy price race.

More generally however, they are many valid economic theories consider inflation to be a Monetary Phenomenon, meaning that inflation is only a result of increased money supply!

In contrast, Keynesian economists, for example, believe that there are frictions in the economy that can cause inflation. For Keynesians there is an inverse relationship between unemployment and inflation, so that when one rises the other falls. This relationship is described by the Phillips curve.

I personally believe that the current inflation we are experiencing is definitely the result of the crisis in the supply chains! In some cases today's inflation looks more like the photo below 😆

5 Common Effects of Inflation

If we could sort the most major effect of in inflation in the economy, it would be:

• Reduce Purchasing Power.

Source

As it is obvious, higher price, fewer product and services available. the fall in consumption, possibly leading to a small drop in prices (taking into account the law of supply and demand), but not immediately

• Τhe poor get poorer

Source

The economically weaker are shaken. Lower-income consumers tend to spend a higher proportion of their income overall and on necessities than those with higher incomes, and so have less of a cushion against the loss of purchasing power inherent in inflation. The poor are also less likely to own assets like real estate, which has traditionally served as an inflation hedge.

• Borrowing costs rise

https://files.peakd.com/file/peakd-hive/giorgakis/23yJX31sQ76MihnVQhJNPtR3sga51NyWBRc62QoDPKqUf3jUzs1CQrZ1dUNTxxLX6PnvX.jpeg[Source](https://www.digitalmomblog.com/inflation-memes/)

Central banks raise lending rates, making the capital that borrowers have to pay back much more expensive

• The higher inflation, the faster economic growth

Elevated inflation discourages saving, since it erodes the purchasing power of the savings over time. That prospect can encourage consumers to spend and businesses to invest

• Destroys Bonds, Stock and cryptos

Source

Normally, bonds are lower-risk investments providing regular interest income at a fixed rate. Inflation, and especially high inflation, impairs the value of bonds by lowering the present value of that income. Something similar happend also in stocks and in cryptos

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