What is Greedflation For UPSC?
Source : Indian Express
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Overview
- What is Greedflation?
- What is happening in US and Europe?
Why in News ?
According to the most recent financial statistics from the US and Europe, businesses generally appear to be generating more profit than their whole sales should warrant, which is contributing to greed inflation.
What is Greedflation?
- According to the concept of “greedflation,” businesses raised their prices well above the level necessary to cover their rising expenses in
Image by Tumisu from Pixabay order to take advantage of the inflation that consumers were experiencing and maximise their profit margins.
- In turn, this fueled inflation even more.
- Europe and the US there is having the growing consensus that greedflation is the real culprit.
What is happening in US and Europe?
- The surge in energy prices was the main cause of the high inflation that Europe saw in 2022 (since the commencement of the conflict), although increasing salaries made a relatively little impact.
- However, increased business profits contributed significantly and additional to inflation.
- The corporate profits have spiked to the highest level in the past 100 years in US.
Terms
- Disinflation
- Disinflation refers to the trend when the inflation rate decelerates.
- Suppose it was 10% in April, 7% in May and 5% in June. This is disinflation.
- When prices are growing (or inflation is occurring), but doing so more slowly each month, such situation is referred to as disinflation.
- Deflation
- Deflation is the exact opposite of inflation. Imagine if the general prices level in June was 5% lower than what it was in June last year.
- Reflation
- Reflation typically follows deflation as policymakers try to pump up economic activity either by government spending more and/or interest rates being reduced.
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