<< Chapter < Page Chapter >> Page >

Inflation around the world

Around the rest of the world, the pattern of inflation has been very mixed, as can be seen in [link] which shows inflation rates over the last several decades. Many industrialized countries, not just the United States, had relatively high inflation rates in the 1970s. For example, in 1975, Japan’s inflation rate was over 8% and the inflation rate for the United Kingdom was almost 25%. In the 1980s, inflation rates came down in the United States and in Europe and have largely stayed down.

Countries with relatively low inflation rates, 1960–2014

The graph shows that the United States, Japan, Germany, and the United Kingdom all had periods of high inflation in the 1970s and early 1980s, though Germany did not have nearly the high rates of inflation as seen in the other countries. Since the early 1990s, all four countries have had inflation rates below 5%, with Japan’s rate consistently lower than those of Germany, the United Kingdom, and the United States. However, the graph also shows that, as of 2014, Japan had the highest inflation rate of the four.
This chart shows the annual percentage change in consumer prices compared with the previous year’s consumer prices in the United States, the United Kingdom, Japan, and Germany.

Countries with controlled economies in the 1970s, like the Soviet Union and China, historically had very low rates of measured inflation—because prices were forbidden to rise by law, except for the cases where the government deemed a price increase to be due to quality improvements. However, these countries also had perpetual shortages of goods, since forbidding prices to rise acts like a price ceiling and creates a situation where quantity demanded often exceeds quantity supplied. As Russia and China made a transition toward more market-oriented economies, they also experienced outbursts of inflation, although the statistics for these economies should be regarded as somewhat shakier. Inflation in China averaged about 10% per year for much of the 1980s and early 1990s, although it has dropped off since then. Russia experienced hyperinflation    —an outburst of high inflation—of 2,500% per year in the early 1990s, although by 2006 Russia’s consumer price inflation had dipped below 10% per year, as shown in [link] . The closest the United States has ever gotten to hyperinflation was during the Civil War, 1860–1865, in the Confederate states.

Countries with relatively high inflation rates, 1980–2013

The first graph shows that Brazil had an extremely high inflation rate, over 2000%, in 1990. The second graph, which is on a smaller scale, shows that Russia had a spike in its inflation rate in the late 1990s. Though Russia's rates have all been lower over the last decade, they are still relatively high rates.
These charts show the percentage change in consumer prices compared with the previous year’s consumer prices in Brazil, China, and Russia. (a) Of these, Brazil and Russia experienced hyperinflation at some point between the mid-1980s and mid-1990s. (b) Though not as high, China and Nigeria also had high inflation rates in the mid-1990s. Even though their inflation rates have come down over the last two decades, several of these countries continue to see significant inflation rates. (Sources: http://research.stlouisfed.org/fred2/series/FPCPITOTLZGBRA; http://research.stlouisfed.org/fred2/series/CHNCPIALLMINMEI; http://research.stlouisfed.org/fred2/series/FPCPITOTLZGRUS)

Many countries in Latin America experienced raging hyperinflation during the 1980s and early 1990s, with inflation rates often well above 100% per year. In 1990, for example, both Brazil and Argentina saw inflation climb above 2000%. Certain countries in Africa experienced extremely high rates of inflation, sometimes bordering on hyperinflation, in the 1990s. Nigeria, the most populous country in Africa, had an inflation rate of 75% in 1995.

In the early 2000s, the problem of inflation appears to have diminished for most countries, at least in comparison to the worst times of recent decades. As we noted in this earlier Bring it Home feature, in recent years, the world’s worst example of hyperinflation was in Zimbabwe, where at one point the government was issuing bills with a face value of $100 trillion (in Zimbabwean dollars)—that is, the bills had $100,000,000,000,000 written on the front, but were almost worthless. In many countries, the memory of double-digit, triple-digit, and even quadruple-digit inflation is not very far in the past.

Key concepts and summary

In the U.S. economy, the annual inflation rate in the last two decades has typically been around 2% to 4%. The periods of highest inflation in the United States in the twentieth century occurred during the years after World Wars I and II, and in the 1970s. The period of lowest inflation—actually, with deflation—was the Great Depression of the 1930s.

Problems

Within 1 or 2 percentage points, what has the U.S. inflation rate been during the last 20 years? Draw a graph to show the data.

Got questions? Get instant answers now!

Questions & Answers

the art of managing the production, distribution and consumption.
Satangthem Reply
what is economics
Khawar Reply
okk
damfash
marginal utility is the additional satisfaction one derives from consuming additional unit of a good or service.
Fred
It's the allocation of scarce resources.
Fred
marginal utility please?
Dishan
marginal utility is the additional satisfaction one derives from consuming additional unit of a good or service.
Fred
I know the definition, but I don't understand its meaning.
Dishan
what is the must definition of economic please?
Nurudeen
demand lfs
Alpha
Economics is derived from the word Oikonomia which means management of household things. Thus, Economics is a study of household things with the constrains of allocating scare resources.
Dishan
what is Open Market Operation
Adu Reply
dominating middlemen men activities circumstances
Christy Reply
what Equilibrium price
Adji Reply
what is gap
mirwais
who is good with the indifference curve
Dexter
What is diseconomic
Alixe Reply
what are the types of goods
WARIDI
how can price determination be the central problem of micro economics
simon Reply
marginal cost formula
Nandu Reply
you should differentiate the total cost function in order to get marginal cost function then you can get marginal cost from it
boniphace
What about total cost
Foday
ok
Foday
how can price determination be the central problem if micro economics
simon
formula of cross elasticity of demand
Theresia Reply
what is ceteris paribus
Priyanka Reply
what is ceteris parabus
Priyanka
Ceteris paribus - Literally, "other things being equal"; usually used in economics to indicate that all variables except the ones specified are assumed not to change.
Abdullah
What is broker
scor
land is natural resources that is made by nature
scor
What is broker
scor
what is land
kafui
What is broker
scor
land is natural resources that is made by nature
scor
whats poppina nigga turn it up for a minute get it
amarsyaheed Reply
what is this?
Philo
am from nigeria@ pilo
Frank
am from nigeria@ pilo
Frank
so
owusu
what is production possibility frontier
owusu
it's a summary of opportunity cost depicted on a curve.
okhiria
please help me solve this question with the aid of appropriate diagrams explain how each of the following changes will affect the market price and quantity of bread 1. A
Manuela Reply
please l need past question about economics
Prosper Reply
ok let me know some of the questions please.
Effah
ok am not wit some if den nw buh by tommorow I shall get Dem
adepojurafiu
Hi guys can I get Adam Smith's WEALTH OF NATIONS fo sale?
Ukpen
hello I'm Babaisa alhaji Mustapha. I'm studying Economics in the university of Maiduguri
Babaisa
okay
Humaira
my name is faisal Yahaya. i studied economics at Kaduna state university before proceeding to West African union university benin republic for masters
Faisal
Hi guys..I am from Bangladesh..
Mannan
Wat d meaning of management
igwe Reply
disaster management cycle
Gogul Reply
cooperate social responsibility
igwe
Fedric Wilson Taylor also define management as the act of knowing what to do and seeing that it is done in the best and cheapest way
OLANIYI

Get the best Principles of economics course in your pocket!





Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Principles of economics' conversation and receive update notifications?

Ask