What about the inflation essay

Essay on inflation in 100 words

Cheap monetary policy or the policy of credit expansion adopted by the monetary authority also leads to increase in the money supply which raises the demand for goods and services in the economy. This causes reduced investor and household confidence hence they hold back on spending or any investment. Demand pull inflation is where aggregate demand exceeds aggregate supply. The purchasing power of your savings declined by 3. However, the redistributive burdens of inflation on income and wealth are most likely to be minimal if inflation is anticipated by the people. Prices of commodities are thereby increased. Firms cannot increase supply without increasing prices since the economy is at full employment. Inflation is generally considered a monetary phenomenon for it is normally characterized by an excessive money supply. However, Chinese people have been greatly affected by the inflation caused by such rapid economic development. However, if in an inflation-ridden economy creditors chronically loose, it is wise not to advance loans or to shut down business. The fresh rise in prices will again be compensated by giving still higher wages to the workers. Inflation is always cumulative in the sense that a mild inflation in the first instance gathers momentum leading to rapid price rises.

In the past decades, China has experienced a rapid economic growth. Cost - push inflation 3.

effects of inflation essay

If the annual rate of inflation in an economy is anticipated correctly people will try to protect them against losses resulting from inflation.

If the consumption spending is countered by the government via price control and rationing device, the inflationary situation may be called a suppressed one.

This results in a bigger profit.

Essay on inflation in punjabi

From a simplistic view, high levels of inflation and unemployment indicate that the economy is not operating at is an optimal level of output. Thus, money plays a vital role. Increases in Profit Margins: High profit margins on the part of producers due to their monopolistic position raise the cost of production which in turn pushes up the prices. However, no such hard and fast generalizations can be made. One of the important causes of price rise is the rise in price of raw materials. The important criteria that need to be satisfied for inflation are: i Price rise should be substantial. Mugabe, experienced ,, p. Every economy experiences inflation through the business cycle, which is defined as the natural fluctuation in economic activity between inflation expansion , and recession contraction. There was a remarkable increase in production of food grains during first two plans and supply of food grains was good. Galloping and Hyperinflation: Walking inflation may be converted into running inflation. This goes unusually untold. At this stage there is no limit to price rise, and price rise goes out of control. In other words, wage rate increases always lag behind price increases. I was in regular contact with nominated guide and contacting him for discussing the project.

Increase in Population: It is another major cause for rise in prices. Cost push inflation is caused mainly due to increase in cost of wages and increase in profit margin. Cost push inflation refers to inflationary rise in prices due to increase in costs.

Since then, an explicit policy goal of low inflation has become a mantra for policymakers, and many countries, such as the U. And this is generally considered as the result of the amount of money in circulation more than the actual needs of the economy. Government then experiences a shortfall in investible resources.

Inflation is a serious imbalance in the currently economy and is represented by a generalized increase in prices and a simultaneous decrease in the purchasing power of the national currency. Again, CPI may be induced by wage-push inflation or profit-push inflation.

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