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MacroEconomics in Virginia Beach - Essay Example

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Impacts and causes of Hyper-inflation in Virginia Beach Area Tutor Date: Introduction Inflation refers to a persistent increase in prices of commodities whereby, the purchasing power of money tends to fall (Mankiw, p657). Additionally, inflation may be understood by taking into consideration both monetary and price inflation…
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MacroEconomics in Virginia Beach
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MacroEconomics in Virginia Beach

Download file to see previous pages... Economist and financial analyst determine inflation by finding the difference between the current consumer price index and the previous consumer’s price index (Mankiw, p471). Therefore, this study aims to investigate the impacts and causes of hyper inflation in Virginia area. Impacts of Hyperinflation in Virginia Beach Area The impacts of inflation are numerous whereby, its effects are not only felt by individuals but are also felt by the overall economy. Therefore, hyper-inflation refers to an inflation rate that is above 50 percent, this kind of inflation may be attributed to government actions of printing money in order to finance its expenditure. The act of pritinting money by the Federal government causes an increase in the amount of money in circulation. This may consequently leads to an increase in commodity prices (Mankiw, p382-387). Hyper inflation was first experienced in Germany after the First World War when the German government printed money to reconstructs its economy. Additionally, hyper-inflation was first witnessed in Zimbabwe between the year 2004 and 2009 (Smith, paras1-6). In above connection, the United State reported a hyper-inflation after the Federal government tried print money with an aim of suppressing the negative impacts of world war one. However, the U.S government has taken measures to mitigate as well as prevent the occurrence of hyper-inflation. Among the measures employed include; setting a federal reserve system (Kimberly, paras4-6). In above connection, Virginia anticipated economic and political down turn as a result of hyper-inflation. Legislators in Virginia were wondering whether the establishment of a common currency across the commonwealth could have acted as a perfect substitute for currencies supplied by the Federal government (Kimberly, paras3-5).Some of the substitute that were to be utilized as money include; Gold and Silver. However, the United States Federal government was against the idea because most of their wealth was tied up in foreign debts. On the other hand, the Virginia commonwealth believed that both political and economic problems were attributed to the impacts of hyper-inflation. The Legislators asserted that the problems of hyper-inflation could have been addressed into two major ways namely; motivating people to buy legal tender attached on silver and gold (Kimberly, paras5-6). In above connection, citizens could be motivated to carry out capital investment. This could have been done by government through reduction of tax burdens attached on to such investment. Additionally, it was recommended that Virginia could set a side some intangible assets in order to hedge risk associated with hyperinflation (Kimberly, para6). Causes of Inflation There are two major cause of inflation namely demand pull inflation and cost push inflation. Demand pull inflation involves persistent increase prices of commodities due to higher demand (Tucker, p284). Several factors may be attributed to be the causes of demand push inflation, among the factors include; economic growth, anticipation of inflation in the future, government policies such as fiscal policies, advancement in technology. Whereby, economic growth may leads to an increase in demand for goods and services (Kimberly, paras1-3). On the other han ...Download file to see next pagesRead More
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