What is inflation and how does it work? Well the answer to this is that inflation is the measure of rising prices of goods and services in the economy. To put it simply it means that every time the prices of goods or services go up the value of our savings go down. Inflation could be the result of many different factors. The rise in raw materials that are used to produce goods could trigger a price surge in the market causing the price of goods to rise.
What is inflation?-how does the financial sector use it to their advantage?
Financial institutions like banks and loan agencies know how to use inflation to their advantage. It may not be the most predictable thing to keep track of but financial institutions are able to react to it when it rises and put measures in place so that they are able to reap the profits. Financial institutions have measures in place which they use in order to keep inflation stable and bellow a certain percentage level. The institutions that are responsible for lowering the percentage rate of inflation are usually government owned. Very few privately owned financial institutions able to directly regulate the percentage at which it rises.
Consumers get little benefit when inflation increases. Businesses get more benefit from it because they have more pricing power. They are able to adjust the prices of their goods and services as a response mechanism to rise in the percentage of inflation. Some companies reap profits from it if they can charge more for their products or services as a result of the increase in demand for their products. It n is apart of the economy whether we want it to be or not and it benefits businesses more than it benefits consumers.
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