204 Understanding What Inflation Is Helps One Navigate It

<p>What is inflation? Inflation is the increase in the price of goods and services over time. Inflation causes your buying power to erode, meaning that the same dollar today buys less in the future. The bottom line to this story is too much money chasing too few goods and services.</p><p>What is causing the current challenge when it comes to inflation? The market power and the poor media coverage of this market power have provided corporate America with price-gouging that is fattening corporate profits, it's all about shareholders. Sadly, inflation is hurting American households, but the underlying cause of inflation is a lack of competition in addition to corporate greed.</p><p>Here are a few factors that cause inflation:</p><ol><li>Demand-pul inflation - Demand-pull inflation happens when the demand for certain goods and services is greater than the economy's ability to meet those demands. When this demand outpaces supply, there's an upward pressure on prices — causing inflation.</li><li>Cost-push inflation -  Cost-push inflation is the increase of prices when the cost of wages and materials goes up. These costs are often passed down to consumers in the form of higher prices for those goods and services.</li><li>Increased money supply - Increased money supply is defined as the total amount of money in circulation, which includes cash, coins, and balances, and bank accounts according to the Federal Reserve.</li><li>Devaluation - Devaluation is downward adjustment in a country's exchange rate, resulting in lower values for a country's currency. The devaluation of a currency makes a country's exports less expensive, encouraging foreign nations to buy more of the devalued goods.</li><li>Rising wages is exactly what it sounds like — an increase in what's being paid to workers. Wages are a cost of production, if wages rise a large amount, businesses will either have to pass the cost on or live with lower margins.</li><li>Policies and regulations - Certain policies can also result in either a cost-push or demand-pull