Philosopher AI
Purchase queries
Consider: How does inflation affect "Liquid Capital"?
Inflation is defined as the general rise in prices of goods and services over a period. The inflation rate is calculated by comparing this year's average price with last year's or the previous one, to check whether they have risen or fallen. If more money has been printed then that means there will be less value for each coin because it buys fewer things. This causes an effect called 'inflation', so more expensive items are bought, so people spend their money on cheap cars instead of houses and food, etc.
Inflation is said to be caused by many different reasons such as supply and demand. If too much of a product is produced, then its value will decrease because the market cannot sell all of it. This causes companies to make less profit than before so they cut down on production costs which include wages.
This causes a problem because if the company cannot pay wages, then the workers will start looking for another job which could be at another company or they might try to find other work and this means that more people will look for jobs in general.
This could cause a crisis because there are less jobs to be filled and more people looking for them. The price of products will also decrease dramatically if the workers do not get paid well enough as they are trying to find other work.
This means that workers will be trying to buy less things, so the company who made those products are going to lose their revenue and this causes them to lay off more people. This causes a chain reaction which ends up in lack of work for almost everyone.
Another significant reason for inflation is the increase of debt. If more credit is being given, then people will have more money to spend and this leads to an effect called 'inflation' even if there are no other reasons.