...1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?). What are the causes of inflation? Inflation has a variety of possible causes, but they are between the Keynesian and monetarist theories, ranging between demand-pull, cost-push, built-in inflation, and the quantity model. With demand-pull, inflation is caused by aggregate demand being more than supply. With cost-push, inflation is caused when manufacturers and businesses raise prices due to shortages in order to balance increases in production costs. With built-in inflation, inflation occurs due to prior increases in prices caused by demand-push or cost-pull. And with quantity, inflation is caused by having too much money in the economy (What Causes Inflation?). Is inflation desirable and what can be done to control inflation in a market economy? Inflation is desirable when it is low, because low inflation represents price stability which is perfect for productive planning and investment. There are many ways to control inflation in a market economy which varies between a Keynesian and monetarist approach. Using a Keynesian approach, the government would get involved by breaking up monopolies, regulating commodity prices, and controlling wage levels, while using a monetarist approach, the government would make changes in policy in order to control the amount of money in the economy (What Causes Inflation?). 2. What is the Consumer Price Index (CPI)? Consumer Price Index...
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...To what extent is inflation damaging to the economy? 18 Inflation is a sustained rise in the average price level. Inflation is measured in two ways the CPI and the RPI. CPI is a measure of the price level used across the European Union and used by the bank of England for setting its inflation target which is currently at 2%, it is calculated using a weighed basket of goods. This basket contains 650 goods. 100,000 households buying patterns of the goods in the baskets are recorded and the inflation rate is calculated through these figures. Maintaining a stable and anticipated inflation rate is a key government objective as it allows them to plan government spending for the future. There are two main theories for why inflation occurs demand pull and cost push. Demand pull inflation arises from aggregate demand shifting at a faster rate than aggregate supply. When the economy is working at near to its productive capacity, an increase in any components of aggregate demand are likely to cause a rise in price level as seen below. In contrast cost push inflation arises when the price level is pushed up by increases in the cost of production. A common cause of this is a faster rise in wages and a rise in the cost of raw materials eg a rise in the cost of oil will cause fuel costs to rise therefore increasing the costs of distributing goods in turn increases the cost of many household products. There are many costs associated with inflation some problems are larger than others...
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...Efectos de las importaciones/exportaciones en la Economía De acuerdo con el método de los gastos del cálculo del producto interno bruto, PIB anual de una economía es la suma total de C + I + G + (X - M), donde C, I y G representa el gasto de consumo, la inversión de capital y el gasto público, respectivamente. Si bien todos esos términos son importantes en el contexto de una economía, echemos un vistazo más de cerca a término (X - M), que representa a las exportaciones menos las importaciones o las exportaciones netas. Si las exportaciones superan a las importaciones, la cifra de las exportaciones netas sería positivo, lo que indica que el país tiene un superávit comercial. Si las exportaciones son menos de las importaciones, la cifra de las exportaciones netas sería negativo, y la nación tiene un déficit comercial. Las exportaciones netas positivas contribuyen al crecimiento económico, algo que es intuitivamente fácil de entender. Más exportaciones significan una mayor producción de las fábricas e instalaciones industriales, así como un mayor número de personas empleadas para mantener estas fábricas en funcionamiento. La recepción de los ingresos de exportación también representa un ingreso de fondos en el país, lo que estimula el gasto del consumidor y contribuye al crecimiento económico. Por el contrario, las importaciones se consideran un lastre para la economía, ya que se puede medir por la ecuación del PIB. Las importaciones representan una salida de recursos de...
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...hat is inflation? Inflation is an increase in prices for goods and services (What is Inflation?). What are the causes of inflation? Inflation has a variety of possible causes, but they are between the Keynesian and monetarist theories, ranging between demand-pull, cost-push, built-in inflation, and the quantity model. With demand-pull, inflation is caused by aggregate demand being more than supply. With cost-push, inflation is caused when manufacturers and businesses raise prices due to shortages in order to balance increases in production costs. With built-in inflation, inflation occurs due to prior increases in prices caused by demand-push or cost-pull. And with quantity, inflation is caused by having too much money in the economy (What Causes Inflation?). Is inflation desirable and what can be done to control inflation in a market economy? Inflation is desirable when it is low, because low inflation represents price stability which is perfect for productive planning and investment. There are many ways to control inflation in a market economy which varies between a Keynesian and monetarist approach. Using a Keynesian approach, the government would get involved by breaking up monopolies, regulating commodity prices, and controlling wage levels, while using a monetarist approach, the government would make changes in policy in order to control the amount of money in the economy (What Causes Inflation?). 2. What is the Consumer Price Index (CPI)? Consumer Price Index (CPI)...
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...Inflation and Government Economic Policies Student’s Name Course Name Instructor’s Name 1. What is inflation? What are the causes of inflation? Is inflation desirable and what can be done to control inflation in a market economy? Inflation, in simple terms, is the sustained increase in prices of goods and services produced and rendered in an economy. It is the upward movement in the average level of prices. Each unit of currency buys fewer goods and service when the general price level rises. Market power is the cause of inflation. The two main causes of inflation are: a. Demand push: When an economy is almost at full employment, the increase in the average demand with lesser supply will lead to inflation. This is because, all people will have disposable income as they are employed which gives way to the need for luxuries. When the supply is less, the prices increase. b. Cost pull: This kind of inflation is because of the rising costs. Companies have to necessarily meet these increase in costs. The best way to do it is to pass the costs to the consumers. This results in price inflation. (Economics help, 2014) Sometimes, an inflationary economy is a sign of growth. However, it may not be desired at all times (i.e.) when it grows consistently. Inflation can be controlled by increasing indirect tax rates or increasing the savings and lending rates. Increasing tax rates will make the consumers pay more tax and hence discourage them from spending. The...
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...Inflation Trends and Poverty in Bangladesh CONTENTS ABBREVIATIONS .................................................................................................................ii EXECUTIVE SUMMARY ....................................................................................................iii I. INTRODUCTION ....................................................................................................................1 II.INFLATION A. What is Inflation B .How is it measured C. Inflation and Interest rates D. Inflation and Investments Types of Inflation II. TREND OF MACROECONOMIC PERFORMANCE AND POVERTY REDUCTION INITIATIVES IN BANGLADESH ......................................................2 A. Growth Performance ...............................................................................................2 B. Savings and Investment ..........................................................................................2 C. Inflation ...................................................................................................................3 D. Fiscal Sector Developments ....................................................................................3 E. Macroeconomic Challenges of Bangladesh ............................................................4 F. Medium-term Macroeconomic Framework.............................................................5 G...
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...Causes of Inflation 5 Figure 1-The Oil Price and Inflation 5 The Effects of Inflation 7 A Comparison of Regional and Global Inflation Rates 8 Table 1-Annual Inflation Rates-Selected Caribbean Countries 8 Table 2-GDP per capita- Selected Caribbean Countries 8 Table 3-Annual Inflation Rates-Developed Countries 8 Inflationary Trends and Analysis 9 Figure 2- The Last Decade 9 Figure 3- Inflation and Unemployment 9 Conclusion 10 Recommendations 10 Executive Summary Analysing the domestic inflation rate, it was found that the main driver of inflation was food prices. Rising global food prices is expected to continue to put upward pressure on local food prices and subsequently the headline inflation rate in Trinidad and Tobago. While this is a global phenomenon, developing countries are expected to be impacted harder than that of the developed nations. This is due to lower incomes as well as less developed and efficient market systems. Food accounts for a substantial portion of imports in Trinidad and Tobago therefore making us highly susceptible to imported inflation. To limit the impact of imported inflation, local agriculture and manufacturing sectors need to expand. Another contributor to the inflation rate was the average annual oil price for the corresponding year. These two variables possessed a strong positive correlation. Energy prices affect transportation and production and when they increase, the cost of final products increase. Inflation was found...
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...Topic: China’s five year inflation rate from 2007 to 2012 Content 1. Introduction ------------------------------------------------------------------------P5 2. Inflation rate of China over the last 5 years ----------------------------P5, 6, 7 -Definition of the concept -----------------------------------------------------P5, 6 -Performance over the last 5 years-----------------------------------------P6, 7 3. Impacts of the future economic performance ----------------------------P7, 8 4. Other relevant issues and discussion--------------------------------------P8, 9 5. Conclusion --------------------------------------------------------------------------P10 6. References--------------------------------------------------------------------P10, 11, 12 1. Introduction In today’s world, inflation this word keep appearing in our lives. From newspaper, television, internet etc. Now a day more and more people taking about the inflation. Not only because of the inflation keeping appear in our live, but also the people know more about the inflation than before. Few years ago, most of people do not know what inflation is and what it can do with our live. But today, this has been changed with the development of social and the growth of the economic. In the past people can only see inflation this word in some report. And most of the people do not understand about the inflation. Nowadays people already know what the inflation represents. By the news...
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...| Inflation and Government Economic Policies | M3:A2 | 5/1/2013 | | ECO 201 M3:A2 5/1/13 1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?). What are the causes of inflation? Inflation has a variety of possible causes, but they are between the Keynesian and monetarist theories, ranging between demand-pull, cost-push, built-in inflation, and the quantity model. With demand-pull, inflation is caused by aggregate demand being more than supply. With cost-push, inflation is caused when manufacturers and businesses raise prices due to shortages in order to balance increases in production costs. With built-in inflation, inflation occurs due to prior increases in prices caused by demand-push or cost-pull. And with quantity, inflation is caused by having too much money in the economy (What Causes Inflation?). Is inflation desirable and what can be done to control inflation in a market economy? Inflation is desirable when it is low, because low inflation represents price stability which is perfect for productive planning and investment. There are many ways to control inflation in a market economy which varies between a Keynesian and monetarist approach. Using a Keynesian approach, the government would get involved by breaking up monopolies, regulating commodity prices, and controlling wage levels, while using a monetarist approach, the government would make changes in policy in order to control the amount of money...
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...Assignment 2: LASA 1: Inflation and Government Economic Policies Inflation is a measure of how prices have changed over time. If prices are changing due to inflation, each dollar spent will buy less. In order to answer the questions below, go to the following website: http://www.bls.gov/cpi/ Questions: What is inflation? What are the causes of inflation? Is inflation desirable and what can be done to control inflation in a market economy? What is the Consumer Price Index (CPI)? How has the CPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CPI for this period and cite your source. What is the Producer Price Index (PPI)? How has the PPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the PPI for this period and cite your source. What is the Consumer Expenditure Survey (CE)? How has the Survey behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CE for this period and cite your source. What do the measures above tell us about consumer behavior? Have incomes changed enough to offset the inflation since 2000? What can we predict about future inflation? What are the implications of these measures for government economic policies? By Wednesday, January 22, 2014, create a Microsoft Word file to collate your answers and submit it to the M3: Assignment 2 Dropbox. ...
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...1. What is Inflation: Five Types of Inflation Defined Inflation is a situation of sustained and inordinate increase in the prices of goods and services. When there is a rise in general price level for all goods and services it is known as inflation. An inflationary situation could be because of the rise in any single price or a group of prices of related goods and services. Types of Inflation There are no less than five different types of inflation: • Commodity inflation, better known as cost-push inflation • Wage inflation, otherwise known as demand-pull inflation • Monetary inflation, • Fiscal inflation, and • Foreign exchange inflation. Cost-push Inflation: As the name suggests, if there is increase in the cost of production of goods and services, there is likely to be a forceful increase in the prices of finished goods and services. For instance, a rise in the wages of laborers would raise the per-unit costs of production and this would lead to rise in prices for the related products. This type of inflation may or may not occur in conjunction with demand-pull inflation. Demand-pull Inflation This type of inflation occurs when total demand for goods and services in an economy exceeds the supply of the same. When the supply is less, the prices of these goods and services would rise, leading to a situation called demand-pull inflation. This type of inflation affects the market economy adversely during the wartime. Fiscal inflation Fiscal inflation is due to...
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...Curve: Phillips Curve: looking at the economy by focusing on Inflation (a nominal variable) and the Unemployment Rate (a real variable). A Phillips Curve can represent a theory, stating what that theory sees as a connection between inflation and unemployment. Or, a Phillips Curve can represent actual data, reality. The Phillips Curve is usually representative graphically, with the vertical axis representing the rate of inflation and the horizontal axis representing the unemployment rate. Vertical Phillips Curve Under classical theory (pre-Keynes), there was a “dichotomy” between money and the real economy. So changes in the money supply should affect only inflation, not unemployment. Under this money neutrality, there should be no connection between the inflation rate and unemployment. This can be represented graphically with a vertical line: [pic] Keynesian Theory Keynes suggested that since prices don’t fully adjust in the short run, changes in demand can affect inflation and unemployment. For example, if Aggregate Demand increased from more C, or I, or G, or NX, or money supply, then prices would rise and unemployment would fall. Conversely, a decrease in Aggregate Demand would bring about a recession with higher unemployment but lower inflation (maybe even deflation). [pic] Evidence In the 1950’s and 1960’s, economists gathered evidence to see if Keynesian prediction about a trade-off between inflation and unemployment was correct. The simplest idea would be...
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...“Inflation: Everyone's illusion of wealth” The Indian Scenario A talk of inflation is inevitable. The term Inflation is no longer stranger to India and its people. Till the early nineties, Indians even used to two digit inflation rates. But, since the mid nineties, controlling inflation has become the priority for the policy makers. The current scenario of inflation in India is even worse. The current inflation rate for October 2011 is 9.39% and the average inflation rate for the year 2011 is 9.06%.The concern continues to remain clearly focused on inflation that is just not going away, despite the repeated rate increases. While inflation has been declining in primary products, there has been a small upward movement in recent months, and manufactured product’s WPI (Wholesale Price Index) as well as CPI(Consumer Price Index) shows consistent inflation persistence. R I A N T % E S Fig : Monthly inflation rate in 2011 Now what does an inflation mean? What are the causes of the inflation? And how does it affect the common man and the economy as a whole? In basic terms, Inflation is the sustained increase in the general price level of the goods and services in an economy. It basically decreases the value of the money and the purchasing power of the customers. It is usually measured by the Consumer Price Index (CPI).In India; however, it is measured using the wholesale price index (WPI). A condition when the prices...
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...Inflation Tutorial http://www.investopedia.com/university/inflation/ Thanks very much for downloading the printable version of this tutorial. As always, we welcome any feedback or suggestions. http://www.investopedia.com/contact.aspx Table of Contents 1) Inflation: Introduction 2) Inflation: What Is Inflation? 3) Inflation: How Is It Measure? 4) Inflation: Inflation And Interest Rates 5) Inflation: Inflation And Investments 6) Inflation: Conclusion Introduction During World War II, you could buy a loaf of bread for $0.15, a new car for less than $1,000 and an average house for around $5,000. In the twenty-first century, bread, cars, houses and just about everything else cost more. A lot more. Clearly, we've experienced a significant amount of inflation over the last 60 years. When inflation surged to double-digit levels in the mid- to late-1970s, Americans declared it public enemy No.1. Since then, public anxiety has abated along with inflation, but people remain fearful of inflation, even at the minimal levels we've seen over the past few years. Although it's common knowledge that prices go up over time, the general population doesn't understand the forces behind inflation. What causes inflation? How does it affect your standard of living? This tutorial will shed some light on these questions and consider other aspects of inflation. (Page 1 of 7) Copyright © 2010, Investopedia.com - All rights reserved. Investopedia.com – the resource for investing and personal...
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...Inflation and Government Economic Policies Inflation is a measure of how prices have changed over time. If prices are changing due to inflation, each dollar spent will buy less. In order to answer the questions below, go to the following website: http://www.bls.gov/cpi/ Questions: 1. What is inflation? What are the causes of inflation? Is inflation desirable and what can be done to control inflation in a market economy? 2. What is the Consumer Price Index (CPI)? How has the CPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CPI for this period and cite your source. 3. What is the Producer Price Index (PPI)? How has the PPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the PPI for this period and cite your source. 4. What is the Consumer Expenditure Survey (CE)? How has the Survey behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CE for this period and cite your source. 5. What do the measures above tell us about consumer behavior? Have incomes changed enough to offset the inflation since 2000? What can we predict about future inflation? 6. What are the implications of these measures for government economic policies? Explained inflation. Identified the causes of inflation. Explained whether or not inflation is desirable...
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