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Buying Power: The Prices and Inflation

By: Alex Sam The inflation is a common rise in price for the goods and services, when the demand exceeds the offer. Small percent of interest of inflation is a natural consequence of economic growth. However inflation testifies to decrease or reduction of a buying power of the national currency. If the costume costing 3.000 roubles in past year, this year costs(stands) 6.000 roubles, cost of currency drops. During inflation of the price grow much faster, than salary, so that consumer capacity of the consumers is reduced. The high inflation is considered as the bad phenomenon, as she(it) bates the national currency and can call confusion in economy.

The basic detecting instruments of inflation are a consumer price index and indexes of the prices of the manufacturers, demonstrates variation of consumer prices and service, and - variation of the prices on materials used by the companies. These indexes settle up on the basis of comparison of available datas on past year, which one demonstrate growth or decrease reduction of inflation. They are published in specialized mass media.

The interest rate is the price of money. The low interest rates do make money by more accessible in the form of the credit for legal and natural persons. The low rates generate demand, as stimulate the people to borrow and to purchase. By the major rates, which one we shall consider, are the rate under the near-term credits and the rate. If the rates are increased, the growth signifies becomes slower. Than too fast to react to their decrease or/and reductions or increases, look at their variation after some last months or quarters better.

Other relevant rate is prime rate, or basis rate, on which one the banks serve the best clients. This rate is mounted by banks. To understand the tendency of variation of the rates, trace their dynamics for a period of several months or quarters.

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