Definition of Inflation

Definition or understanding of inflation many varieties that can be found in the economic literature. Various kinds of definitions occurs because the extent of the effect of inflation on the various sectors of the economy. And the close relationship between inflation and the wide variety of sectors of the economy spawned a variety of definitions and perceptions about inflation. However, in principle, there are still some views into one that inflation is a phenomenon and economic dilemma.Inflation is a condition that indicates the weakening of purchasing power, followed by the decline in the real value (intrinsic) a country's currency (Khalwaty, 2000 : 5)


Ehrenberg and Smith in Khalwaty (2000: 5) gives the definition of inflation, noting to do with the level of wages and unemployment, as follows:
“ The overall rate of wage inflation in the economy is the annual percentage rate of increase in some composite measures of hourly earnings in the economy. The construction of such an index is a considerable task because average hourly earning can change, even if the wage scales for every individual job remain constant. For example, if there is a shift the distribution of employment towards high-wage industries (such as construction) and away from low wage industries (such as retail trade), average hourly earnings will increase.”

Other opinions from Amancher and Ulbrich in Khalwaty (2000: 5-6), as follows:

“Inflation arises in the general, or average, level of prices. The measures of inflation is a price index. A price index measures changes in price level from year to year. The best-known measures is the Consumer Price Index (CPI). Consumer Price Index is a measure of the year to year increase in the price level based on the cost of a representative market basket of consumer goods.”

Byrns and Stone in Khalwaty (2000: 6) describes and gives the definition of inflation as follows:

“Most people view increase in any of the prices they pay for goods and services as inflationary. For the purpose of macroeconomic analysis, we are concerned with changes in the level of absolute prices because these represent inflation or deflation. Inflation occurs when the average level of prices rises while deflation occurs when prices fall on the average. An increase in the price of single goods is not necessarily inflationary.”

So inflation is a situation where an increase in the prices sharply that continuous in the time period long enough (Khalwaty, 2000: 6). In tune with the rising prices, the value of money fell sharply also proportional to the increase in these prices. The increase in prices is not merely because of the influence of technology, the properties of the goods or because of the influence when before the feast, but because of the effects of inflation, which generally take place in the long term.

Source : 
Khalwaty, Tajul. 2000. Inflasi dan Solusinya. Jakarta : PT. Gramedia Pustaka.

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