Answer to Question #93502 in Macroeconomics for Nthabeleng

Question

Do you agree with the following statement: “The price of electricity is going up; therefore we are experiencing inflation”?

Answer 1

No, I disagree.

Inflation is an increase in the general level of prices for goods and services for the long term. Inflation as a long, steady process should be distinguished from a one-time price increase (for example, due to monetary reform or a political event). Inflation does not mean an increase in all prices in the economy, because the prices of individual goods and services may rise, fall or remain unchanged. It is important that the overall price level changes.

Thus, increasing the price of only 1 product - electricity does not mean inflation.