Hoarding is also playing a bad role in escalation of prices in the commodities One of the most important reasons for inflation is the deficit budgeting. An inflationary situation gives an incentive to businessmen to raise prices of their products so as to earn higher doses of profit.
Imagine today, how worse we are! In addition to aggregate demand, aggregate supply also generates inflationary process. Rise in prices is called inflation. When they act as buyers they want prices of goods and services to remain stable but as sellers they expect the prices of goods and services should go up.
Inflation to a certain extent is good for the economy as people earn more money and they are even paid more money, but the situation worsens when the economy is hit by hyperinflation.
Anyway, CPI stems from the leftward shift of the aggregate supply curve. However, how much price level will rise following an increase in aggregate demand depends on the slope of the AS curve.
But why does aggregate demand rise? This is a two pronged statement since decreasing wages may deflate the economy however in the long run it may lead to even worse consequences. Mere holding of cash balances during inflation is unwise since its real value declines. Trade unions demand higher money wages as a compensation against inflationary price rise.
In the midst of rising inflationary trend, firms cannot accurately estimate their costs and revenues.
Walking inflation may be converted into running inflation. The decrease sales spells a fall in profits for firms if any at all are being made. Similarly, beneficiaries from life insurance programmes are also hit badly by inflation since real value of savings deteriorate.
However, the redistributive burdens of inflation on income and wealth are most likely to be minimal if inflation is anticipated by the people. In an economy, there are some people who live on interest income—they suffer most. Second, reckless buying of luxuries is another cause of inflation in the country.
Finally, anticipated inflation may also be costly to the society.
If the consumption spending is countered by the government via price control and rationing device, the inflationary situation may be called a suppressed one. The initiative will have to be taken by the government and after setting a precedent the government should get people involved in it by holding different seminars and workshops to control this problem.
By Omna Roy Inflation Meaning: Firms cannot increase supply without increasing prices since the economy is at full employment. In the developing countries, like Pakistan.
It may also be classified in accordance with the reactions of the government toward inflation. When they enjoyed a better living standard. This results in a bigger profit. Higher profit induces owners of firms to distribute profit among investors or shareholders.
Just like the price of a commodity, the level of prices is determined by the interaction of aggregate demand and aggregate supply.
Higher export earnings increase the purchasing power of the exporting countries. Increase in the price of petrol by OPEC compels the government to increase the price of petrol and diesel. Black marketeers are also benefited by inflation. Cost of production may rise due to a rise in the cost of raw materials or increase in wages.Inflation may be defined as ‘a sustained upward trend in the general level of prices’ and not the price of only one or two goods.
G. Ackley defined inflation as ‘a persistent and appreciable rise in the general level or average of prices’.In other words, inflation is a state of. This article discusses the inflation, the current situation, the causes and the means to control inflation in India. Inflation refers to the rise in the price of goods and fall in the value of money.
Inflation refers to the problem of rising prices. 3 causes of inflation causes of inflation causes of inflation essay causes of inflation in economics discuss inflation easy essay on inflation effects of inflation. Economic essays on inflation.
UK inflation since Definition – Inflation – Inflation is a sustained rise in the cost of living and average price level. Causes Inflation – Inflation is caused by excess demand in the economy, a rise in costs of production, rapid growth in the money supply.
In the recent times the rate of inflation has been hovering around 4 to 5 per cent. This is, of course, the official rate of inflation. Here you can publish your research papers, essays, letters, stories, poetries, biographies, notes, reviews, advises and allied information with a single vision to liberate knowledge.
Published: Mon, 5 Dec In practice, the evolution of inflation is measured by the change in the Consumer Price Index (CPI). To understand the phenomenon of inflation, one must distinguish between generalized price increases that occur once and forever, those .Download