INFLATION IN INDIA DEFINITIONS: "An increase in the quantity of currency in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices: may be caused by an increase in the volume of paper money issued or mined gold, or a relative increase in expenditure as when the supply of goods fails to meet demand This definition includes some of the basic economic aspects of inflation and would seem to indicate that inflation is not defined as the increase in prices but as an increase in the money supply causing the increase in prices, i.e. inflation is a cause rather than an effect A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services. In this definition, inflation would appear to be the consequence or result (increasing prices) rather than the cause. A general and progressive increase in prices; "in inflation everything becomes more valuable except money" CAUSES OF INFLATION: Inflation is caused by a combination of four factors. These factors are: The money supply increases. The supply of goods decreases. The demand for money decreases. goods rise IMPACT OF INFLATION: Inflation seemed to be a chronic problem in many parts of the world. It is widely believed that inflation results in inefficient allocation of resources and therefore reduces potential economic growth. Inflation imposes high costs on economies and societies; it disproportionately harms poor and fixed-income groups, creates uncertainty throughout the economy, and undermines macroeconomic stability. High inflation has always penalized the poor more than the rich because the poor are less able to protect themselves from the consequences and less able to protect themselves from the risks posed by high inflation. Reducing inflation, therefore, directly benefits low-income and fixed-income groups. Economists conceive of inflation most clearly as a "sustained increase in the general price level." Their concerns focus on issues such as whether inflation distorts economic decisions. Very high inflation has a negative impact on economic performance, as multi-country studies show. Likewise, moderate levels of inflation can distort investment and consumption decisions.1. ABOUT OUR FUTURE PLANS: Inflation impacts our plans for the future. When you save for retirement, college, a house, or simply budget for the next 12 months, the cost of goods and services has a direct impact on your goals.