langtímaverðhækkun

Langtímaverðhækkun refers to a sustained increase in the general price level of goods and services in an economy over an extended period. This phenomenon is commonly known as inflation. It erodes the purchasing power of money, meaning that each unit of currency buys fewer goods and services than it did before.

Several factors can contribute to langtímaverðhækkun. Demand-pull inflation occurs when aggregate demand in an economy outpaces aggregate supply, leading businesses to raise prices. Cost-push inflation arises when the cost of production for businesses increases, such as through higher wages or raw material prices, which are then passed on to consumers. Monetary factors, such as an excessive increase in the money supply relative to the growth of the economy, can also fuel inflation.

The consequences of persistent langtímaverðhækkun can be significant. It can create uncertainty for businesses and consumers, making long-term financial planning more difficult. For individuals, it can reduce the real value of savings and fixed incomes. Central banks often aim to manage and control inflation through monetary policy tools, such as adjusting interest rates, to maintain price stability and support sustainable economic growth. The target inflation rate can vary between countries and economic philosophies.