Current Event - Research Paper Example

This mainly affects consumers since the prices of commodities go on the rise and money becomes scarcer. The value of money in the affected states declines and therefore, a lot of money can only afford remarkably few commodities (Von, 2006). It is not easy to detect inflation as we can detect other things like drought. Once inflation has occurred, it puts away investors, and they prefer to invest in other states where the likelihood of making profits is higher with fewer risks of their businesses collapsing.

This is in line with Buttonwood’s arguments. It even results to release of fewer goods and services into the market since raw materials are unavailable or the cost is too high. Customers may end up lacking particularly essential commodities or getting them at exaggerated prices. Inflation may be because of different things. Buttonwood article gives mixed reactions from economists. The article confirms that inflation might be as a result of hoarding of essential commodities that are in high demand.

However, the main cause of inflation is the government activities, Buttonwood confirm. In cases where the government prints excess money, when it releases it in to circulation, aiming to deal with a certain crisis it raises inflation instead. Increased supply of money results to decline in the value of money reducing the prices of commodities and raising inflation (Voitovich, 1995) Customers are among those directly affected by profit margins. A raised profit margin increases the prices of commodities, and this affects the quantity that the consumer purchases.

High profit margins can help maintain a business in the market, but this is only possible if their particular goods are in high demand (Von, 2006). Failure to have high demands, the company fails to realize its set goal, hence may end up not affording to pay its workers, and therefore only resolves to lay them off. According to Robinson (2007), unemployment means further decline in the products consumption fewer sales and therefore this only favors the competitors of the declining business. International lending and national debts by the third world may be a leading cause of inflation.

The developing countries borrow funds from the developed ones and pay them off with heavy interests (Sandmo, 2011). To deal with the debts they developing governments overtax their consumers to raise revenue and this result to increased prices of commodities reducing affordability. The citizens carry the burden of buying goods at unreasonably high prices. This is usually exploitation of the developing countries by the already developed ones. Article relation to economics Scheidel (2007) in support of Buttonwood (2012) article adds that another cause of inflation may be political instabilities within states.

In cases of involvement into wars, the environment is usually not conducive for producers and therefore this means shortages in the supply of commodities. He argues that shortages in supply mean hiked prices that are unaffordable with the limited finances available. For example, when U.S.A attacked Iraq, this caused political instability in Iraq and hence affected the supply of petroleum products to the entire world. Supply of oil drastically declined and therefore this caused global inflation, that shortage affected every country.

This has also happened in African countries after the supply of oil by Libya was