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Inflation

Inflation
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For other uses, see Inflation (disambiguation).
In mainstream economics, inflation is a rise in the general level of prices, as measured against some baseline of purchasing power.

The prevailing view in mainstream economics is that inflation is caused by the interaction of the supply of money with output and interest rates. In general, mainstream economists divide into two camps: those who believe that monetary effects dominate all others in setting the rate of inflation, or broadly speaking, monetarists, and those who believe that the interaction of money, interest and output dominate over other effects, or broadly speaking Keynesians. Other theories, such as those of the Austrian school of economics, believe that an inflation of the general price level and of specific prices is a result from an increase in the supply of money by central banking authorities.

Related terms include: deflation, a general falling level of prices, disinflation, the reduction of the rate of inflation, hyper-inflation, an out of control inflationary spiral, and reflation, which is an attempt to raise prices to counteract deflationary pressures.

Contents
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1 Measures of inflation
2 The role of inflation in the economy
3 Causes of inflation
3.1 Keynesian Theory
3.2 Monetarism
3.3 Rational Expectations
3.4 Other Theories
3.4.1 Austrian economics
3.4.2 Marxist theory
3.4.3 Supply-side economics
3.5 Issues of classical political economy
3.5.1 Currency and Banking Schools
3.5.2 Anti-Classical or Backing Theory
4 Stopping inflation
5 See also
6 Notes
7 References
7.1 Mainstream
7.2 Austrian
7.3 Left Wing


[edit] Measures of inflation
Measuring inflation is a question of econometrics, that is, finding objective ways of comparing nominal prices to real activity. In many places in economics, "real" variables need to be compared, in order to calculate GDP,...