Inflation is its essence, types and level. Inflation, its essence, types, forms. Inflation essence, socio-economic consequences and ways to overcome it

Inflation -This is the depreciation of money, the decrease in their purchasing power.

The term "inflation" appeared in the second half of the 19th century, having migrated from the arsenal of medicine. Literally translated from Latin, inflation means "bloat", i.e. the overflow of channels of circulation with excess paper money, not supported by a corresponding increase in the mass of commodities.

Inflation is a phenomenon of violation of monetary circulation and is associated with various monetary factors: the issue of signs of value, the volume of the money supply, the speed of money turnover, the amount of mutually repaying payments.

Obviously, inflation is a process due to the interaction of two factors - pricing and money. On the one hand, the depreciation of money is a process associated with rising prices, on the other hand, a fall in the purchasing power of money can also occur under the influence of changes in their quantity in circulation.

Based on the degree of state intervention in market processes, inflation is divided into open and suppressed (suppressed). Open inflation is characterized by non-intervention of the state in the processes of price and wage formation. Suppressed inflation refers to a situation due to government control of price increases or wage increases, or both. It results in a trade deficit.

Types of inflation are determined by its level, on which socio-economic policy and the nature of anti-inflationary measures depend:

1. moderate inflation(3-4% per year). This is a normal level that plays the role of a catalyst for economic growth.

2. Creeping inflation(8-10% per year). This indicates an increase in destabilization phenomena in the economy.

3. galloping(up to 50% per year).

4. Hyperinflation(50-100% per year). Debtors (including the state) benefit from hyperinflation.

There are 2 types of inflation:

1) inflation of demand (buyers);

2) inflation of costs (sellers).

Demand inflation model shows that for a given amount of aggregate supply, an increase in aggregate demand leads to a higher price level. At the same time, entrepreneurs are expanding production, attracting additional labor. Rising wages.

Inflation Model Driven by Rising Costs of Production, admits 2 reasons for its occurrence:

Due to the rise in the cost of fuel, raw materials, due to rising import prices, changes in production conditions, increased transport costs;

As a result of wage increases under pressure from trade unions.

If the increase in wages is not balanced by some counteracting factors (for example, an increase in labor productivity), then average costs increase. Manufacturers are starting to cut production volumes. With the same demand, a decrease in supply leads to an increase in prices. Unemployment is growing.

Inflation has monetary and non-monetary causes.

Non-monetary reasons:

disproportions in the economy;

· excessive development of the military-industrial complex (military-industrial complex);

· small export sector with strong import dependence;

· decline in GDP (gross domestic product);

inflation expectations of the population.

Monetary nature of inflation:

q state budget deficit;

q influence of money supply on inflation rates. An increase in the assets of the Central Bank in all cases leads to an increase in the money supply, which means an increase in effective demand. As a result, the level of prices for goods rises;

q Velocity of circulation of money (it increases when the population flees from the national currency, which is explained by low confidence and inflationary expectations of the population).

Inflation expectations have been given great importance in recent decades. The use of the concept of expectations in economic theory was substantiated by J. Hicks in his work "Value and Capital". The elasticity of expectations refers to the ratio between the expected and actual change in the cost of goods.

In modern theories of inflation, there are 2 concepts:

§ adaptive expectations;

§ rational expectations.

Adaptive expectations are built taking into account the forecasting error, which is defined as the difference between the expected and actual inflation rates for the previous period.

The adaptive expectations model assumes that the expected rate of inflation can be based on a weighted average of past inflation rates.

Rational expectations are based on a comprehensive consideration of both past and future information, in particular, the regulation policy of that fragment of the economy, the state of which affects the subject of expectations. The "rationality" of expectations is manifested in the fact that the subject does not refuse in advance any source of information and takes it into account in accordance with its reliability and significance.

Finance- is the science of how people manage the spending and receipt of scarce monetary resources over a certain period of time.

Finance is an economic category that exists in various socio-economic formations. They have a single abstract essence in all formations, but a fundamentally new content in each of them. The essence of finance, their role in social reproduction is determined by the economic structure of society, the nature and functions of the state. To understand the essence of this economic category, it is necessary to consider first of all the history of the emergence of financial relations.
Historically, the first financial relations arose with the division of society into classes and the emergence of the state. Under the conditions of slavery and feudalism, finances played a relatively insignificant role in the formation of the state's monetary income, since natural relations dominated in these formations. The main types of state income at that time were tribute and robberies of conquered peoples, taxes in kind, fees and various labor duties. A distinctive feature of finance in the period under review was their private law principle, since the treasury of the state was at the same time the treasury of the head of state.
With the development of the capitalist mode of production, the sphere of commodity-money relations expanded. State revenues and expenditures were separated from the sovereign's treasury. The proportion of natural relationships has declined sharply. Taxes in kind were replaced by taxes in cash. A nationwide fund of funds arose - a budget that the head of state could not manage alone. The formation and use of the budget began to be systemic, i.e. there were systems of state revenues and expenditures with a certain composition, structure and legislative consolidation. Being associated with the formation of state revenues and expenditures, finance becomes the spokesman for value (monetary) relations.
At the same time, a characteristic feature of this period was the narrowness of the financial system: it consisted of one link - the budgetary one, and the number of financial relations was limited. All of them were connected with the formation and use of the budget.
Thus, we can conclude that finance is an objective economic category associated with the patterns of development of material production under certain conditions; at the same time, the state acts as the organizer of specific financial relations.
The term "finance" comes from the Latin word "finansia" - monetary payment. Thus, finance is directly related to money. Money is a prerequisite for the existence of finance. If there is no money, there can be no finance. However, finance differs from money both in content and in the functions performed. Money is a strictly defined economic category with a clearly defined essence and functions, a special commodity that serves as a universal equivalent. Finances are certain economic relations that arise at the time of the movement of money, when they are transferred or transferred in cash or non-cash. Therefore, financial relations are primarily monetary relations. However, not all monetary relations can be considered as financial. The sphere of monetary relations is wider than financial relations. Finances express only such monetary relations that are associated with the formation and use of funds of funds of business entities and the state, i.e. centralized and decentralized cash funds. The sources of these funds are gross domestic product (GDP) and national income.
So, finance- this is a set of monetary relations that arise in the process of formation, distribution and use of centralized and decentralized funds of funds in order to perform the functions and tasks of the state and ensure conditions for expanded reproduction.

Distributive function of finance associated with the distribution of GDP and its main part - the national income. Without the participation of finance, the national income cannot be distributed.

Control function of finance manifests itself in all economic activities of enterprises. The ruble is controlled by production and non-production costs, the correspondence of these costs to income, the formation and use of fixed assets and working capital. It operates at all stages of the circulation of funds, in financing and lending, cashless payments, in relations with the budget and other parts of the financial system. With the help of ruble control, the process of product sales, the fulfillment of supply contracts, profitability, profit, capital productivity, turnover of working capital are influenced.
Financial control is the work of special regulatory bodies. Depending on the entities exercising financial control, it is divided into national, departmental, intra-economic, public and independent (audit).
National (non-departmental) financial control carried out by public authorities and administration (the President and the Government of the Russian Federation, the Federal Assembly, the Ministry of Finance, the Ministry of Taxes and Duties, etc.). Objects are subject to control regardless of their departmental subordination. National financial control is also carried out by legislative authorities, financial, tax, credit institutions, state committees, ministries and departments, departments of local authorities. The most important function of the legislature is to control the state of finances, the spending of public funds.
Departmental financial control carried out by control and audit departments of ministries and departments. They check the financial and economic activities of subordinate enterprises and institutions.
On-farm financial control is carried out by financial services of enterprises, institutions (accounting departments, financial departments). Their functions include checking the production and financial activities of the enterprise and its structural divisions.
Public financial control carried out by non-governmental organizations. The object of control depends on the tasks facing them.
Independent financial control (audit) conducted by audit firms and services. The object of control is the activity of all economic entities.
The need to create an independent financial control - audit - was due to the development of market relations and the creation of joint-stock ownership. An audit is an independent examination and analysis of the financial statements of an economic entity in order to determine their reliability, completeness and reality, compliance with applicable law and the requirements for the preparation of financial statements. Auditing is a fundamentally new form of control over the financial, economic and commercial activities of enterprises and organizations.
Depending on the timing of the financial control is divided into preliminary, current and subsequent.
Preliminary financial control is carried out at the stage of compiling, reviewing and approving the financial plans of enterprises, estimates of budgetary organizations, credit and cash applications, financial sections of business plans, draft budgets, etc. It precedes the implementation of business operations and is designed to prevent the waste of material, labor and financial resources, thereby preventing direct or indirect damage to the enterprise.
Current financial control is carried out in the process of fulfilling financial plans, in the course of economic and financial operations themselves. Its task is to timely control the correctness, legality and expediency of expenses incurred, income received, completeness and timeliness of settlements with the budget. It is carried out on a daily basis by financial services in order to timely detect and establish the mistakes made. Efficiency and flexibility are of paramount importance here.
Subsequent financial control organized in the form of checks and revisions of the correctness, legality and expediency of financial transactions. Its main tasks are to identify shortcomings and omissions in the use of material, labor and financial resources, compensate for the damage caused, bring the perpetrators to administrative and financial responsibility, and take measures to prevent violations of financial discipline.

Finance- this is a system of monetary relations in society regarding the formation and use of centralized and decentralized funds of funds in the framework of the distribution

and redistribution of the gross national product and national income to solve the economic, social and political problems of the state.

Inflation- the process of depreciation of money, a decrease in the purchasing power of the ruble, an increase in the general price level.

Inflation is manifested not only in price increases, in this case there is open inflation, there may also be hidden inflation or suppressed inflation, manifested in the existence of a shortage, deterioration in the quality of goods.

But not every price increase is a sign of inflation. Prices may increase due to:

Improving the quality of products;

· deterioration in the extraction of fuel and raw materials;

changing social needs.

But this is not inflation.

Literally translated from Latin, inflation means “swelling”, i.e. the overflow of channels of circulation with excess paper money, not supported by a corresponding increase in the mass of commodities.

Causes of inflation are diverse.

Usually, inflation is based on a discrepancy between money demand and the mass of commodities - the demand for goods and services exceeds the volume of trade, which creates conditions for manufacturers and suppliers to raise prices regardless of the level of costs.

Disproportions between supply and demand, the excess of income over consumer spending can be generated by:

the state budget deficit (expenditures are greater than incomes);

Excessive investment (the volume of investments exceeds the possibilities of the economy);

• outstripping growth of wages in comparison with the growth of production and increase in labor productivity;

· Arbitrary price fixing, causing distortions in the magnitude and structure of demand.

The causes of inflation can be external and internal. External causes This is, first of all, a reduction in foreign trade revenues.

The inflationary process in Russia was intensified by the fall in world prices for fuel and non-ferrous metals, which constitute an important item of its export, and the unfavorable situation on the world grain market. In Hungary, whose economy is largely dependent on the state of foreign economic relations, it was the external factor that played an almost decisive role in intensifying the inflationary process.

At the same time, the policy of increasing exports and restraining imports reduced the saturation of the domestic market and, with unchanged demand, generated an increase in domestic, wholesale and consumer prices.

Internal reasons:

· deformation of the national economic structure, which is expressed in a significant lag in the consumer sector with a clearly hypertrophied development of heavy industry and especially military engineering;

· shortcomings of the economic mechanism. In the context of the centralization of the economy, there was practically no feedback, there were no effective economic levers that would be able to regulate the ratio between the money supply and the mass of commodities. The decisive role in the country was played by the State Planning Commission, and not by the Ministry of Finance and Gossnab.

Considering the causes of inflation, economists distinguish between its two types - supply and demand inflation. In essence, these are two, as a rule, interconnected, but unequal causes of inflation: one is an excess of funds from buyers, the other is an increase in production costs.

Demand inflation- this is a type of inflation generated by an excess of aggregate demand, for which, for one reason or another, production does not keep pace. Excess demand drives up prices. They say: too much money hunting for too few goods.

The mechanism for the development of demand-pull inflation can be represented as follows: demand increases, price increases, profit increases, cash income increases, demand increases, price increases ...

cost inflation. Here, the mechanism of inflation begins to unwind due to rising costs.

Two starting points are possible:

1) costs begin to rise as a result of wage increases;

2) costs begin to rise as a result of the rise in the cost of raw materials and fuel (growth in world prices, changes in production conditions, increased transportation costs). In this case, the demand remains the same, but the supply decreases.

The mechanism of development of supply inflation in accordance with the first starting point can be represented as follows: increase in wages, decrease in supply, increase in price, increase in nominal wages, decrease in real incomes, increase in production costs, increase in price ...

The mechanism for the development of supply inflation in accordance with the second starting point can be represented as follows: an increase in the price of raw materials, fuel; supply reduction; price increase; increase in nominal wages; decline in real incomes; increase in production costs; price increase …

In this case, not demand, but costs (and reduced supply) serve as an impetus to inflation.

In real life, it is very difficult to distinguish between two types of inflation. But it is important to keep in mind what kind of inflation is the generator of inflationary price increases.

In Russia, as a result of price liberalization measures, the demand of the population for consumer goods has decreased, and cost inflation has begun to play an important role (prices for raw materials and fuel have increased). But inflationary demand continues to be supported as a result of rising incomes of certain groups of the population, not always consistent financial policy.

In conditions of restrained inflation (which is typical for most industrialized Western countries), cost-push inflation is capable of a kind of self-regulation: if costs rise, prices rise, then production and supply of goods are gradually reduced, and this may ultimately lead to some containment of cost growth. In general, these countries are characterized by relatively low inflation rates.

Measuring and indicators of inflation.

Inflation indicators are designed to give a quantitative assessment of inflationary processes.

The widely used indicators are price growth indices.

Indices- these are relative indicators characterizing the ratio of prices over time. They are calculated using different methods. Usually, the prices of the base year are taken as 100%, and the prices of subsequent years are recalculated in relation to the base year:

The inflation rate (price growth rate in the reporting year relative to the base year) is determined as follows:

Inflation indicators can serve:

Retail price indices for certain (most important) types of goods (70 items)

the amount of cash in circulation and the issuance of money into circulation

· cost of living index - an indicator that characterizes the dynamics of the cost of a set of consumer goods and services (in accordance with the actual structure of consumer spending of the population).

The following are used as an indirect indicator of the inflation rate:

data on the ratio of commodity stocks to the amount of cash deposits of the population: a decrease in stocks and an increase in deposits indicate an increase in the degree of inflationary stress

· Data on the excess of household income over expenditure as a percentage of income can also characterize the level of inflation. If incomes grow faster or even at the same rate as prices, this indicates the danger of an inflationary spiral.

Main types of inflation.

Depending on the nature of inflation and the rate of growth of inflationary processes, the following types of inflation are distinguished:

1) Creeping inflation. It is characterized by relatively low rates of price growth, approximately or slightly more than 10% per year. This kind of inflation is inherent in most countries with developed market economies.

2) Galloping inflation. Unlike creeping, it is difficult to control. Its growth rate is usually expressed in double digits. The galloping rise in prices manifests itself differently and does not have strictly defined quantitative parameters. Inflationary processes depend on the level of development of the country, the socio-economic structure, and the dissimilar mechanism for regulating price processes.

3) Hyperinflation. Its conditional milestone is a monthly (within 3-4 months) price increase of over 50%, and the annual one will be expressed in four-digit figures. She poses the greatest danger. Its peculiarity is that it is practically uncontrollable, the usual functional relationships and the usual price control levers do not work, the issue of money increases, frenzied speculation develops, and production is disorganized.

Under these conditions, in order to get ahead of the inevitable price increase expected by all, the owners of money tend to get rid of them as soon as possible. As a result, a rush demand unfolds, and those goods that can serve as a means of partial savings (real estate, jewelry) are bought up first of all. People act under the pressure of “inflationary psychosis”, and this spurs prices up, and inflation begins to feed itself.

A classic example of hyperinflation is the situation that developed in Germany and a number of other countries after the Second World War. In Germany, in 1923, the level of price increases was estimated at 10-12 figures, wages had to be spent immediately, because prices rose several times during the day.

In Russia, the amount of money in circulation increased from 27 billion in January 1918 to 219 trillion. 845 billion by December 1921. The emission led to a fall in the purchasing power of the ruble by 10 million times. Inflation is a very complex, extraordinarily contradictory phenomenon. One should not draw a direct analogy between price inflation and the issuance of money, although this is often done in the economic literature.

In our country, the issue of money grew from 28 billion rubles in 1990 to 89 billion in 1991 and 1,513 billion in 1992. At the same time, the money supply lagged behind real needs due to the outstripping price growth. All this intensified inflationary processes, led to the collapse of the monetary system.

Consequences of inflation.

To some extent, speaking about the indicators and types of inflation, we have already touched on the issue of the consequences and its impact on the economy.

In Western countries, and has become almost an integral attribute of the market system of management. This allows us to talk not just about the consequences, but about some specific functions of inflation.

Many economists are of the view that a slight inflation of 3-4% per year, accompanied by a corresponding increase in the money supply, can stimulate production. In accordance with Fisher's equation of exchange: MV=PQ, some growth in the money supply creates a kind of incentive to increase output. At the same time, the expansion of production will be the greater, the more unused factors of production are available. The growth of the mass of money accelerates the payment turnover (V), contributes to the intensification of investment activity. In turn, the growth of production leads to the restoration of equilibrium between the commodity and money supply at a higher price level.

This process is controversial. On the one hand, monetary profits increase, capital investments expand, and on the other hand, price increases lead to the depreciation of unused capital. Not everyone wins, but, first of all, the strongest firms with modern equipment and the most perfect organization of production.

Social groups living on non-fixed incomes are in a better position if their nominal incomes grow at a rate that outstrips price growth.

In the context of inflationary expectations, entrepreneurs seek to protect themselves from risk, in particular from the expected rise in prices for imported goods (raw materials, fuel, components).

To avoid losses caused by the depreciation of money, manufacturers, suppliers, intermediaries raise prices, thereby spurring inflation.

People who borrow money can benefit from inflation, unless it is stipulated that the percentage for the loan should take into account inflationary price increases.

Inflation regulation.

Regulation of inflation is carried out through the anti-inflationary policy pursued by the state.

Anti-inflation policy:

1) an active policy aimed at eliminating the causes that caused inflation;

2) adaptive policy aimed at adjusting to inflation, mitigating its negative consequences.

An active policy is carried out using monetary and non-monetary leverage.

Monetary leverage:

control over the issue of money;

· implementation of current control over the state of the money supply through operations in the open market and reserve policy;

Prevention of issuance financing of the budget;

· suppression of the circulation of money surrogates;

· Carrying out monetary reforms of the confiscation type.

Non-monetary leverage:

Reducing government spending

increase in taxes;

Reduction of the state budget deficit;

transition to a tight monetary policy;

stabilization of the exchange rate by fixing it.

curbing the growth of factor incomes and prices;

fight against monopoly and development of market institutions;

stimulation of production.

Adaptive policy involves:

indexing;

· agreements with employers and trade unions on the rate of growth of prices and wages;

inflation - this is the overflow of the sphere of circulation with banknotes in excess of real needs and the depreciation of paper money associated with this. The main form of manifestation of inflation is the rise in prices for goods and services, i.e., an increase in the general level of prices.

MV=PQ.

where M- the amount of money in circulation;

V- the speed of circulation of the monetary unit;

Q- number of goods;

R - unit price.

It can be seen from the equation that the balance between the money supply and its commodity coverage can be achieved by changing the price, as a rule, as a result of its increase.

In the modern world, inflation has become permanent and global. Thus, in most industrialized countries with a market economy over the past decade, its level has ranged from 2 to 8%, a price increase of 3-5% per year was considered the norm. In many developing countries, the inflation rate during this period was an order of magnitude higher, and in some it exceeded 100 and even 1000%. The scale of inflation in the consumer sector of the USSR from the beginning of the 60s to the end of the 80s, according to the research institutes of banks, ranged from 3 to 10%, in 1989 they reached 12 - 14%, in 1991 - 600 - 700% . Inflation in Russia in 1992 exceeded 2600%, in 1993 - 980%, in 1994 - 400%, in 1995 - 250%

We should point out the fundamental differences between open and suppressed inflation (Fig. 11-5). In a market economy, the depreciation of money is manifested in a direct and obvious increase in prices, and there are three levels of it.

1) creeping inflation (annual price growth does not exceed 10%);

2) galloping inflation (for a year prices rise up to 100%);

3) hyperinflation (price growth is measured by a 3-4-digit figure).

Suppressed (hidden) inflation, which is characteristic of countries with command economies, including the USSR, manifests itself quite differently.

Rice. 11-5. Types of inflation

According to official dogmas, in the USSR it was believed that inflation was impossible with centralized pricing, long-term freezing of the level of prices for essential goods.

In fact, inflation was also present in the Soviet economy, but in a hidden, suppressed form, which was manifested in the rise in the cost of fixed assets while maintaining their previous technical characteristics, in the decrease in the quality of consumer goods at constant prices, in the growth of retail prices for consumer durables. , in speculation, queues, huge amounts of pent-up demand.

The state held back the rise in prices for consumer goods, and this led to the fact that the amount of deposits in the savings banks of the USSR increased very quickly. However, starting in 1988, the state began to lose control over both revenues and prices, and since that time consumer ruble inflation has turned from subdued to overt. By 1990, the savings of the population in books and "in capsules" reached an explosive level, they exceeded the annual turnover and more than 5 times exceeded the inventory in stores. I had to introduce coupons, distribute goods among enterprises. After price liberalization in January 1992, latent inflation turned completely open, resulting in the depreciation of savings.

Causes of inflation.

The depreciation of money is due to three reasons that can act both separately and simultaneously:

1) demand inflation;

2) cost inflation;

3) inflationary expectations.

Demand inflation is the excess of money demand over the supply of goods. This usually happens when the state budget deficit grows, when the country is “living beyond its means”: with low incomes, the government carries out large military spending, generously spends money on social programs and on the maintenance of the administrative apparatus, and allows a chronic deficit in the external economic balance of payments. The government has the ability to spend more than it receives, because it has a monopoly on the issue of money.

But if the state tries to solve its problems with the help of the "printing press", then soon it will reap bitter fruits in the form of inflation. By increasing the issue (issue) of money, it is in principle impossible to increase the welfare of the country's citizens, it is only possible to achieve depreciation of banknotes. It was this type of inflation that prevailed in the last years of the existence of the USSR, when revenues were reduced due to falling world prices for energy resources and the growth of separatism, and the Soviet government tried to increase spending on the military-industrial complex and agro-industrial complex.

The second type of inflation is cost inflation, caused by an increase in production costs per unit of output.

There is an opinion that the primary impetus for the development of the inflationary process is the growth of wages, although its share in the price is about 20-25%. This opinion is reflected in phillips curve, named after the Australian economist who substantiated the inverse non-linear relationship between the dynamics of inflation and the growth of unemployment (Fig. 11-6). Phillips explains this process as a wage-price spiral. In his opinion, inflation is high when unemployment is low and low when it is high, when employees are willing to work for less wages. In modern conditions, the Phillips curve is not universal, in many countries there is no stable relationship between inflation and unemployment.

There is also a type of cost inflation called tax inflation, which is most often caused by the government. By raising taxes to cover the growing costs of armaments, administration, social programs, the state often exacerbates the problem of inflation. We must keep in mind the fact that tax rates increase production costs, so the level of rates should be optimal.

Cost-push inflation is also an important feature of Soviet and Russian inflation.

There are two main causes of cost-push inflation in the USSR:

1. The costly nature of the command economy itself, the constant pressure from the authorities on the cost indicators of the growth rate of production. Hence the desire of manufacturers to use expensive raw materials, materials, structures, semi-finished products so that the final product becomes more expensive.

2. Rising prices for raw materials. The cost of extracting raw materials and their transportation due to the development of new remote deposits, the deterioration of mining and geological conditions are increasing.

From here it is possible to trace the inflationary spiral, for example, along the following chain: metallurgical raw materials - machines and equipment made from metal - metallurgical raw materials.

The third reason for the depreciation of money is inflation expectations, those. inflation that breeds inflation. Accustomed to a long rise in prices, consumers live in constant fear of its acceleration. The slightest rumor about any changes in the economic policy of the government is enough for people to rush to the shops and start buying all the necessary and unnecessary goods "in reserve". If the government "honestly" warns its citizens about the impending price increase, then this will lead to price increases at the announced time to a greater extent than previously thought. The reason for this is the increased imbalance of supply and demand due to the rush invasion of buyers. Therefore, during periods of economic instability, it is dangerous to publicly express pessimistic forecasts - they can become self-fulfilling.

Inflation indicators.

In countries with a developed market economy, the following indicators are used to measure the level of inflation: the consumer price index, the producer price index and the GNP deflator.

Consumer price index(Lasperis index) is defined as the ratio of the consumer basket in market prices of a given year to the set of goods of the same consumer basket, expressed in base year prices:

where Q 0 - the number of goods of the current period in physical terms;

P1- unit price of goods in the current period;

P 0 - unit price of goods in the base period.

The GNP deflator is calculated using the formula:

Nominal GNP expressed in current prices, i.e. at market prices for that year. To determine the real GNP, the prices of the period, which is taken as the base one, are used.

In quantifying inflation, the “rule of 70” is often used to calculate the number of years it takes for the price level to double. To do this, divide the number 70 by the annual inflation rate. For example, at 8% inflation, the price level will double in about 9 years (70/8), at 3% - after 23 years (70/3).

Consequences of inflation.

Socio - economic consequences and ways to overcome inflation are very complex and contradictory. Its small pace has a positive effect on the market situation, leads to an increase in the investment rate, and, consequently, to an increase in production volumes, an increase in the income of firms and employees. However, as inflation deepens, it turns into a serious brake on economic development and sharply aggravates the social situation in society.

Even galloping inflation disorganizes the economy, increases disproportions between sectors of the economy, distorts the structure of consumer demand and sharply aggravates the problem of selling goods on the domestic market, increases the shortage of goods, undermines incentives for money accumulation, devalues ​​the savings of the population, leads to large losses of banks and institutions that provide credit. In conditions of hyperinflation, all these negative phenomena are exacerbated many times over.

Inflation has serious social consequences. When the economy is hit by inflation, income is redistributed in favor of the rich, and the vast majority of the population has to suffer from an inevitable drop in living standards.

This happens in different forms:

1. The real value of personal savings is reduced. The first to suffer are those who hold savings in cash, keep them in bank accounts, or invest in bonds. In a better position are the owners of shares, people who have managed to place their savings in real estate and material assets (houses, cars, land, etc.). We must keep in mind the following circumstance: no matter how perfect the system of anti-inflationary compensation, it will never keep up with the rise in prices. After all, it is extremely difficult to predict future price increases, especially in conditions of hyperinflation, so income supplements and losses from price increases are never fully covered.

2. Inflation not only devalues ​​money, but also disorganizes the entire system of regulation of the market economy. It automatically reduces the effectiveness of economic regulators, often makes their use inappropriate, pushes the state to use administrative methods of regulation.

anti-inflation policy.

Like a fairy tale genie out of a bottle, inflation is easy to release but very hard to bring back. All countries of the world suffer from inflation to one degree or another, and this in itself indicates that they have not yet learned how to “cure” this economic disease. Nevertheless, an extensive arsenal of anti-inflationary measures has been accumulated, which are carried out by the government at the macro level.

In the most general terms, there are two ways to suppress inflation:

1) hold back the money supply;

2) increase the mass of goods.

To limit the amount of money in circulation, it is necessary, first of all, to stop the issue (issuance) of new money, both in cash and in non-cash forms. In practice, this means reducing government spending, as well as introducing a “dear money” policy by the Central Bank (see Topic 14). This inevitably leads, in turn, to freezing prices and incomes, slowing down production and increasing unemployment.

In order to stimulate the growth of the number of goods, they reduce the level of taxation of entrepreneurs, increase the import of goods, introduce new types of goods into circulation (privatize state property) It should be borne in mind that stimulating production increases the supply of goods, as a rule, not immediately, but after some time, but requires immediate "injections" from the state budget, which increases the money supply and ultimately drives up inflation.

Desperate to overcome inflation, governments are trying to adapt to it, limiting themselves to minimizing some of its consequences. In particular, income indexation (salaries, pensions, etc.) corresponding to price indices is used. However, this approach does not satisfy anyone: workers, pensioners and other income recipients are unhappy with the fact that indexation always lags behind price increases; the government is concerned that income indexation is causing a new surge in inflation.

In Russia in the 1990s, the government launched an offensive against inflation, mainly using methods to contain the money supply. The results were rather contradictory. On the one hand, the rampant hyperinflation of 1992 gave way to the galloping inflation of 1995-1996. On the other hand, the deceleration of inflation proceeded against the backdrop of a decline in production and, therefore, was unstable, strongly dependent on the political situation.

The problem of inflation is an integral part of the theory of money.

Inflation is one of the most acute problems of modern economic development in many countries of the world, which negatively affects all aspects of society.

There are different views on the essence and causes of inflation, but two directions prevail: the first one considers inflation as a purely monetary phenomenon caused by a violation of the laws of monetary circulation; the second - as a macroeconomic phenomenon caused by a violation of the proportions of social reproduction, and above all between production and consumption, demand and supply of economic goods.

Meanwhile, inflation is a complex, multilateral phenomenon, the causes of which are due to the interaction of factors in the sphere of production and the sphere of money circulation.

Inflation Outwardly, it looks like a depreciation of money due to their excessive emission, accompanied by an increase in prices for economic goods.

But this is only a form of manifestation, and not the deep essence and cause of inflation. Inflation usually has its outward manifestation in rising prices. But not every price increase is an indicator of inflation. Prices may rise as a result of improved product quality, deterioration in the conditions for the extraction of raw materials, change under the influence of cyclical and seasonal fluctuations in production, natural disasters, etc. But these will not be inflationary, but to a certain extent natural periodic changes in prices for individual goods.

In reality, inflation is the result of macroeconomic imbalance, which is caused by a complex of internal and external causes (Figure 6.16).

The most important internal causes of inflation are:

Fig, 6.16. Main Causes of Inflation

is a heavy burden on the state budget, increases its deficit and generates its (deficit) inflationary financing;

• - increase in the tax burden on producers;
• - outpacing the growth rate of wages in comparison with the growth rate of labor productivity.

External factors of inflation are associated with increased internationalization of economic relations between states, which are accompanied by increased competition in the world capital markets, commodity markets, labor markets, exacerbation of international monetary and credit relations, and structural world crises (energy, food, financial, etc.).

Summarizing what has been said, we can give the following definition of inflation.

Inflation is the depreciation of money caused by disproportions in social production and violation of the laws of money circulation, which is accompanied by an increase in prices for economic goods.

Inflation acquires various types and types (Fig. 6.17).

Depending on the prevailing factor influencing inflation, it is divided into two types: demand-pull inflation and supply-push inflation.

Demand inflation caused by an imbalance between aggregate demand and aggregate supply.

It can be caused by an increase in government purchases of goods (for example, military goods), the demand of entrepreneurs for means of production in conditions of full employment and almost full utilization of production capacities, as well as an increase in the purchasing power of the population (growth in wages) as a result of concerted actions of trade unions, etc. All this causes the formation of a surplus of money in comparison with the quantity of goods, which leads to an increase in demand and prices. Thus, an excess of money in circulation creates a shortage of supply, manufacturers cannot adequately respond to the growth in demand.

Supply (cost) inflation- this is an increase in prices due to an increase in production costs or a decrease in the aggregate supply of goods.

The reasons for the increase in production costs and the reduction in supply may be the rise in prices for raw materials, energy carriers, wage increases, oligopolistic pricing policy, economic and financial

state policy, etc. An increase in production costs per unit of output in the economy reduces profits and the volume of production that entrepreneurs can offer at the current price level. As a result, the aggregate supply of economic goods decreases, which, in turn, raises the price level.

Inflation is a serious threat to the macroeconomics of any country. The destructive effect of this phenomenon is growing like a snowball, and if countermeasures are not taken in time, collapse cannot be avoided. In this article, we will try to consider in detail the following aspects of such a negative economic phenomenon as inflation: essence, causes, types.

The term for this phenomenon originates from the Latin word "inflatio", which in translation into Russian means "swelling" or "swelling". The fact is that the very essence of inflation lies in the long-term and fairly rapid depreciation of money caused by an excessive and unreasonable increase in the amount of cash and non-cash funds in circulation. That is, the one in circulation, as it were, “swells” and “swells”. And this "bloating" leads to a colossal imbalance in the economy - an imbalance in supply and demand.

Briefly, the essence of inflation can be described by the following scheme: money emission - depreciation of money - price increase - emission. That is, the release of a large amount of paper money, unsecured by the gold reserves in the state treasury, causes their depreciation and, as a result, a continuous increase in prices. Rising prices require large cash outlays, which leads to a shortage of money in circulation and, further to the next issue of paper money. And this lump is increasing in size, dragging the state into a deep economic hole.

It should be noted that inflation is typical for the circulation of paper money, in the conditions of the work of real values ​​​​(gold or silver), it is simply impossible. In itself, this cannot be called a product of modern economics. Returning to the events of historical prescription, it is worth noting that such processes are generally characteristic of an unstable economy: during periods of wars, revolutions, crisis phenomena, during the transition from one economic management system to another, etc. Inflation, the essence of which is fully manifested in these cases, is caused by a violation of the law of money circulation due to the financing of the state's expenses by issuing paper money.

It is wrong to identify the essence of inflation only with this socio-economic phenomenon is much more complicated. In addition, inflationary processes are possible without rising prices, when money depreciates, for example, when the cost of goods is fixed by the state. At the same time, there is no real decrease in the value of the monetary unit, but money depreciates, since there is no way to spend savings on the purchase of scarce things. An increase in the volume of such “forced” savings leads to the formation of an “inflationary overhang”, under the influence of which the state decides to increase prices on a planned basis. That is, if the balance of commodity-money relations is disturbed, the economy of the state experiences the emergence of inflation and its grave consequences.

There are three main ones depending on the rate of price growth:

• moderate or creeping (growth up to 10% per year);
• galloping (from 20% to 200% per year);
• hyperinflation (over 200% per year).

The main reasons for the growth of the money supply, initiating inflationary processes:

• imbalance of state revenues and expenditures, namely, the budget deficit;
• excessive investment, leading to excess production of one type of product and a shortage of another;
• military spending of the state;
• social and political extraordinary circumstances like strikes, political instability, etc.;
• errors in the implementation of such public policies as price, tax, budget, credit and monetary.

Thus, the essence of inflation, as a multifactorial phenomenon, lies in any processes of depreciation of money, price increases and an increase in the money supply.