What is inflation and who is affected by this

The situation when the prices of goods and services witness a general rise is called inflation. Inflation diminishes the purchasing power of money and fewer things than earlier can be bought with the same amount. As money forms part of the goods, inflation is that variable that determines the price of money too. In other words, inflation determines the interest rate that in essence is “the price of money”, this later having a reflection on the cost of a number of financial services, such as the interest rates on loans or deposits.

Information about inflation and its consequences is published by the National Bank of Moldova as part of an awareness-raising campaign conducted by it in concert with the National Commission for Financial Markets within the financial education project “Learn! Give sense to money”, IPN reports.

The causes of inflation can be diverse. Most of the times, it is the result of the rise in the volume of money in circulation, the rise in prices of imported products, the increase in demand for goods or the reduction of confidence in the national currency. An inflation rate of 5% a year is considered optimal for the economic development of the country.

In most of the cases, including in Moldova, the rate of inflation is calculated based on the consumer price index that measures the general tendency of the prices of a basket of products and services bought by everyone, plus of the products and services that account for a significant part of consumption, such as the foods (bread, vegetables, fruit, meat, sugar, eggs, etc.), nonfoods (clothing, footwear, medicines, fuels) and services (public utilities, passenger transportation).

Inflation affects persons differently. Salary earners can gain or lose depending on the speed at which employers adjust the salaries to the rate of inflation. The pensioners, the unemployed, the recipients of social benefits lose when the allowances are not indexed on time. These categories receive fixed payments at a time when the value of money usually continues to decline. At the same time, the disfavored persons and those with small incomes are much more affected by inflation than those with large incomes. For these categories, the costs for food account for the largest part of the expenses and the rise in prices reduces the quantity of food products that can be purchased.

The materials within the campaign will be broadcast during the next two months and will be available on the websites of the institutions involved in the effort.

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