CHAPTER 2
REVIEW OF RELATED LITERATURE
This chapter presents the list of related studies and literature that serve as a
guideline in the current undertaking. These related studies that were included in this
chapter assist the researchers in comprehending information that are similar to the present
study. The reviewed literature and the related studies were presented under the following
subheadings: inflation, its implication,
INFLATION
Inflation is a rise in prices, which can be translated as the decline of
purchasing power over time. The rate at which purchasing power drops can be reflected
in the average price increase of a basket of selected goods and services over some period
of time as described by J. Fernando (2022). Another definition by A. Morrow (2021)
discussed that inflation is when the average price of virtually everything consumers
buy goes up. Food, houses, cars, clothes, toys, etc. To afford those necessities,
wages have to rise too
M. Boyle et al. (2019) stated in their article that economists have
identified several possible causes for inflation. Cost-push inflation is the decrease in the
aggregate supply of goods and services stemming from an increase in the cost of
production.
An increase in the costs of raw materials or labor can contribute to
demand-pull inflation. Expectations of inflation that prompt higher wages leading to
higher costs are theorized as built-in inflation. Furthermore, K. Matthews (2022)
supplemented that devaluation, increased in money supply, rising wages as well as
policies and regulations are also major factors that influences inflation.
An article by K. Amadeo (2022) discussed that if the inflation rate is high
enough, it hurts the economy. She also added that, over time, inflation increases your cost
of living. People buy more than they need to avoid tomorrow's higher prices, which fuels
the demand for goods and services. Suppliers can't keep up. More importantly, neither
can wages. As a result, everyday goods and services are priced out of most people's
reach. However, sometimes inflation is good for the economy. When it's mild, inflation
has a healthy side effect. Once people start to expect inflation, they spend now rather than
later because they know prices will be higher in the future. Consumer spending drives
economic growth. Moreover, a study of G. Williams (2022) suggested that when
everybody pays more and gets less for it, it can have some profoundly devastating effects
on the economy—and some people get hurt more than others. He also asserted that the
most obvious impact of inflation is that it hurts your purchasing power. If you can’t buy
as many goods and services as you did before inflation your quality of living will
eventually diminish. Essentials will take precedence over non-essentials as everyone tries
to stretch the purchase side of their budget,” says Angelo DeCandia.
