I don’t quite get it, I understand its related to change in prices over time, by does it occur at a steady rate or is it dependent on external factors?
In: Economics
Let’s say the economy overall is doing fine, has steady growth. As a result more and more people will be able to buy products. Entrepreneurs will realize that demand for their products rises and raise their prices, and thus the amount you are able to buy with let’s say 1000¥ will be less than before.
The central bank(s) try to get inflation close to 2%. They define the base rate at which banks are able to borrow money from them. So in situations where the economy is not doing too well they will lower base rate to get banks to granting more credit to non-banks.
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