What causes inflation and why can it damage the economy?

what causes inflation inflation is the rate at which prices increase across the economy it helps explain why an American big Maps cost less than three US Dollars 20 years ago but is around five dollars today on the traditional explanation is too much money chasing too few goods if a central bank prints too much money or makes it slow then prices will rise events like Wars would cause a shortage of goods can also increase prices so a little bit of inflation doesn't really hurt anybody but when inflation is high and volatile and when it's unexpected it can do a lot of damage to the way a capitalist system runs borrowing and lending money becomes very difficult businesses struggle to keep up with Rising costs and they may be forced to employ fewer people to avoid extremes of inflation most central banks try and keeping it around two percent to stop prices from rising they can increase interest rates but how exactly does that work like the part two

Channel: The Economist

Views: 12,562

Keywords: inflation, economy, economics, economics lesson, economics explained, explainer, money, finance, banks, banking, central bank, interest rates

Id: _qItQZEJQxQ

Length: 1min 0sec (60 seconds)

Published: Fri Jul 21 2023