As the
purchasing power of money is driven downward by its
Inflation refers to the increase in price of basic goods and services, as well as the decrease in overall
purchasing power of money. Being a rice-eating country, the hike in rice prices has hit Filipinos right in the gut.
Economists define inflation as "a general increase in prices and fall in
purchasing power of money." In recent years inflation has not been a hot topic since it has been relatively tame in fact, it has averaged less than 2% over the last decade.
Over the course of the last one hundred years the
purchasing power of money has eroded at an average rate of 4.7% per year.
It is not that the
purchasing power of money is invariant-the goal of modern monetary theorists-but that it is not manipulated by the state.
Unlike a gold standard under which the
purchasing power of money could increase, a central bank managed fiat currency can only decline in purchasing power.
The Index measures economic inflation and is a direct measurement of the
purchasing power of money in various financial operations, which includes goods and services.
The change in price level affect on
purchasing power of money namely increasing price level decrease
purchasing power of money "so that an increase in the expected rate of inflation should cause a shift out of money and bonds and into consumer durables" Branson (1979).
da Silva asks, "who did the inflating?" Inflation, in the sense that I used the term there, is a decline in the
purchasing power of money, resulting in a general and prolonged rise in prices.
According to Lloyds TSB Private Banking, PS1 million in 1982 would provide the same value as PS3 million today, meaning the average
purchasing power of money has fallen at an average rate of 3.7% over the past three decades.