What is the effect of inflation?
Inflation is the name given to the creeping process by which the price of everything moves slowly upwards. It is widely believed to be due to the circulation of too much money. It erodes the value of savings, since they can purchase less and less, and most governments adhere to an avowed policy of reducing its rate of progress. Salaries and wages tend to be greatly influenced by inflation, in that inflation serves as the basis for the minimum demand for a wage increase. Inflation is measured as an average percentage increase in the cost of everyday purchases and is estimated in the UK by the Retail Price Index (RPI), statistics compiled officially by the government. Every form of investment needs to grow at a rate at least equal to inflation, or the value of the investment is reduced. Since most manufacturers try to improve their products, and thereby charge a higher price for the new item, there is an inbuilt element of inflation in ordinary technological progress. Because shares prov
