Inflation is a general increase in the prices of goods and services. This is good for the economy if it’s neither too low nor too high. Information about inflation is presented in a video that is disseminated by the National Bank of Moldova as part of the information and awareness-raising campaign “Financial education - a personal, social and economic benefit” that was launched at the start of this week, IPN reports.
Inflation appears when the demand is so high that the producers can hardly satisfy it and increase prices. Or a shortage of important economic resources appears, such as oil, whose price rises and determines increases in food prices, in transport fares and others. In all the cases, with the same sum of money a person can buy less than earlier.
“Is inflation good or bad? If prices decrease, it is deflation. Let’s imagine that the prices decline continuously. If we want a car, a telephone or other goods and we know that their price will decrease, we will put off the purchase. It is similar in the case of producers – why should they make bread today if tomorrow flour will be cheaper? Economic life would slow down and would even stop in some areas. It would be a world of delayed consumption and delayed life,” explains the video.
This also says that inflation is good for the economy if it’s at the right level. In this regard, the National Bank of Moldova uses monetary policy instruments, such as the base rate, to maintain inflation at an optimal annual level for sustainable growth and development of the country’s economy in the medium term.
