Understanding Fundamental Analysis_6. Inflation

Lesson 6: Inflation

Inflation is seen when the amount of money in circulation also grows along
with the expanding economy.

Every economy has its own level of what it deems to be a healthy inflation.
The technique here is for governments and central banks to achieve stability at that
self-chosen level. Too much inflation knocks down the balance of supply and
demand in support of supply, causing the currency to depreciate as there is basically
more of it than demanded. Opposite of this is deflation where the value of money
rises, while products and services become cheaper. Deflation is only beneficial in the
short run. If it lingers for a much longer period, it would put the economy at a
disadvantage.

Money is fuel for the economy, and if that fuel weakens, so will progress.