Are you interested in learning more about inflation and deflation, and which factors influence the value of money? Well, keep reading!
Inflation and deflation are two very different things. Both play a very important role in the global economy and the financial decisions which we make. You always need to pay close attention to how inflation and deflation are influencing the economy and how it could affect the decisions you make.
As an IT specialist and finance professional, I pride myself on paying close attention to detail. That includes monitoring the financial situations around me, such as the value of our money.
What is Inflation and Deflation by Maxim Bederov?
I’ll start by explaining what inflation and deflation are and what causes them.
Inflation is the rate at which the prices of goods and services rise. If inflation gets too high, then it can affect the buying capacity of consumers. Most experts agree that inflation levels between 2-3% are healthy for the economy as people’s wages stay in line with the increased cost of goods and services.
Deflation is when the rate of inflation falls below 0% and will result in goods and services declining in value. Deflation in an economy generally points towards an economy that is deteriorating. It’s usually linked to high rates of unemployment and low levels of goods and services being produced.
Can Inflation and Deflation Influence the Value of our Money?
The answer depends on how you have invested your money. Inflation and deflation can influence the value of your money in both a positive and negative way, depending on what side of the money you find yourself on.
Inflation reduces the value of money. If you have borrowed a large amount of money and the inflation rate goes up, the interest rate will be lower because of the higher inflation. Deflation, on the other hand, will effectively increase the interest rate on the money you have borrowed, causing you to pay back more money on the long run.
Inflation and Deflation Conclusion by Maxim Bederov
As with any business investment you make as an entrepreneur, you must take the time to analyze the market and consider the different factors which can influence your investments such as inflation and deflation. As an private investor it is of course the same. If you know the market and follow its development, you can plan and prepare yourself for major changes.