StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Inflation - Essay Example

Comments (0) Cite this document
Summary
Inflation Name: Institution: Course: Tutor: Date: In an economy, there are times at which goods and services cost rises so that a unit currency will buy less than a previous time when it could buy more. With this general increase in the price of commodities, the currency in use losses it high purchasing power and weakens in relation to the prevailing conditions of the economy (Berlatsky, 2013, p5)…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER98.7% of users find it useful
Inflation
Read TextPreview

Extract of sample "Inflation"

Download file to see previous pages There are different reasons that contribute to inflation in any economy which varies in terms of supply and demand of commodities in supply and the means of exchange (Baumol & Blinder, 2011, p 37). According to economists, moderate or low economic inflation can be caused by the increase in demand of commodities or the scarcity on the side of suppliers. On the other hand, hyperinflation is attributed to high supply of currency in the market in which the individual who possesses it buys commodities at high prices than they ought to cost under normal circumstances. This has ever been witnessed in different countries where currencies have inflated to trigger an economic threat to the businesses within the society. In attempts to curb the inflation from rising to hyperinflation, various methods have been implemented which have led to stabilisation of the economy and improve the predictability of the market conditions. In United Kingdom, UK inflation happened and the country implemented various methods that led to balancing of the economy so that investors could continue to invest in that economy. In looking at the effects of inflation, it is good to consider the various things that lead to it and means that can be used to control it with a practical example of a country that has ever been affected and implemented some methods they used to control it with a focus at the advantages and disadvantages of those methods. In the economy, there are different explanations that economists give as the causes of the economic inflation that affect nation; these are given according to the different types of inflation that are found within an area. In general, the general causes of inflation plays around supply and demand of various things in the market that have direct influence of on the prices of the commodity to be bought. This means that abundance or scarcity of a particular determinant of trade i.e. goods or services and means of exchange, can cause prices of the commodities to rise within a short period. Following this perception, the abundance on the side of demand causes prices to go high because of the competition that arise from the different buyers who are interested in a particular commodity. The other perspective that causes inflation is the scarcity on the side of the supply where only little products over which buyers compete to attain making the sellers to determine the buyer through high prices that are attainable by just a few of them. From this perspective, there are two major categorisation of inflation in the economy, which are dependent on supply and demand in the market where individuals trade and which include moderate and high rate or hyperinflation (Credan, 2006, p45). Moderate inflation is caused by different situation of the demand and supply of the products in the market and can result from increase in the demand for products or reduction of supply. As a result of increased demand for goods or services, many customers that require a particular product contest for it financially and can lead to high prices of such products as in accordance to the law of demand that says that the higher the demand, the lower the supply and hence, the higher the price of the commodity. This results to inflation because ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Inflation Essay Example | Topics and Well Written Essays - 1500 words - 1”, n.d.)
Inflation Essay Example | Topics and Well Written Essays - 1500 words - 1. Retrieved from https://studentshare.org/macro-microeconomics/1481450-inflation
(Inflation Essay Example | Topics and Well Written Essays - 1500 Words - 1)
Inflation Essay Example | Topics and Well Written Essays - 1500 Words - 1. https://studentshare.org/macro-microeconomics/1481450-inflation.
“Inflation Essay Example | Topics and Well Written Essays - 1500 Words - 1”, n.d. https://studentshare.org/macro-microeconomics/1481450-inflation.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Inflation

Inflation

...percentage of goods compared to what it used to when there was no inflation. This happens due to the increase in the money supply which is measured by the producer price index and the consumer price index over time. When inflation rises in an economy in higher rates, it leads to adverse effects in the economy. However, mild inflation in the economy can lead to positive effects such as creation of employment. To keep the rates of inflation low, monetary authorities usually central banks are given the responsibility of controlling prices. This paper will discuss various causes of inflation, types and the effects that it has in the economy. Causes of...
5 Pages(1250 words)Essay

Inflation

.... Concretely, if one unit of bread costs $1 before and it now costs $2 for the same unit of bread, the increase in price can be attributed to inflaction. Inflation is typically measured by comparing the annual change in Consumer Price Index (CPI) or the basket of goods that people normally buy over time. The effect of inflation can either be good or bad. Inflation has the effect of decreasing the net value of money because of the rise of the price of commodities. For example, the $1,000 savings this year may only have the purchasing power of $900 next year due to rising prices caused by inflation. This is not good for investors and consumers alike. For investors, this...
3 Pages(750 words)Essay

Inflation

...in availability of goods and services in the economy (Siegl, 2009). There are various measures of inflation, but most commonly, inflation is measured by using Consumer Price Index (CPI). The CPI refers to price of a basket of commodities and services that an average customer buys and changes in this index allows economists to study the rise and fall of the general price level in the economy which helps them to study the rate of inflation in the economy. In the latter half of 2012, Bank of England Chief Economist, Spencer Dale, had warned that the average standard of living for the Britons would fall in 2013. The country (UK) is still on the recovery phase from the shock of the financial...
6 Pages(1500 words)Essay

Inflation

... rate of inflation to prevail in an economy for gradual growth (Edwards, 1984). Prior to setting up of a business or preparing the annual financial budget for the economy, inflation is always taken into account. Measures are taken to control inflation so as to leave room for investment, global competitiveness and local demand in the economy. Therefore, attaining price stability through controlled inflation has always been one of the major concerns for all economies (Hart, 2010). Inflation is caused through various factors. It is however difficult to conclude as to what factor has precisely led to inflation and by how much. The forces of demand and supply and other factors concurrently result into inflation and the government has the tools...
6 Pages(1500 words)Essay

Inflation

...in percentage and compared over a time period. Economists have defined inflation as the sustained general increase in the price of goods and services1. When the prices goes up more money can only pay for fewer goods and services and the currency is said to have lost its purchasing power as the medium of exchange as well as the unit of account in an economy. When the prices goes up the situation is said to be price inflation while the money is in large supply the situation is referred to as monetary inflation2. Several other concepts are related to inflation such as deflation which refers to a fall in the price levels generally while disinflation refers to a rate decrease in...
7 Pages(1750 words)Essay

Inflation

...increase in the price of goods and services (Hart, 2010 p.10). When the prices goes up more money can only pay for fewer goods and services and the currency is said to have lost its purchasing power as the medium of exchange as well as the unit of account in an economy. when the prices goes up the situation is said to be price inflation while the money is in large supply the situation is referred to as monetary inflation((Hart, 2010 p.12). Several other concepts are related to inflation such as deflation which refers to a fall in the price levels generally while disinflation refers to a rate decrease in inflation. Hyperinflation is when the price increase is beyond...
7 Pages(1750 words)Essay

Inflation

... growth. For instance, during recession, the central bank should lower interest rates, practice quantitative easing or print more money. This means more money supply into the economy; thus, increasing economic activities (Pettinger, 2012; Pg. 54). This may also cause inflation but makes it advantageous since the government gets more money to pay its debts. Another option suggested was the government to default by stopping repayment of part or all of the debts. This means it does not have to reduce its spending because of debts. On the other hand, an Economist Peter Eavis did a close analysis in 2012 towards identifying the European crisis. The crisis being in its fourth year by then but the policymakers had still stuck to the same old ideas...
5 Pages(1250 words)Literature review

Inflation

...Article Summary 11th May Rise of India as an Economic Powerhouse India is expected to emerge on top of the other BRIC nations, they are; Brazil, Russia, and China. This emergence can be attributed to the election of a government that is pro-business in last year’s election. Since India attained her independence, the economic history can be divided into two phases. The 1947 to 1991 phase and the one after 1991(Picardo, 2015). The Indian economy was faced with internal issues that included; war, religious riots, shattered economy, poverty and high illiteracy levels. These issues were pivotal in shaping the country’s socialist economic policies. This led the country to rely less on imports and, therefore, encouraged self-reliance... Summary 11th ...
2 Pages(500 words)Assignment

Inflation Control by Government of UK Economy

... of overall fixed capital formation in the UK is depressed by the very low level of public investment. During the 1970s and much of the 1980s the UK endured persistently high inflation. Despite high levels of unemployment, wage increases in the 1980s exceeded productivity growth, provoking strong upward pressure on prices. The boom of the late 1980s created a new inflationary surge, painfully controlled only by high interest rates and the early 1990s recession. Since then, however, the UK's inflation performance has improved markedly. The government has preferred measure of inflation, the RPIX (which excludes mortgage interest payments), has fluctuated within a narrow range in recent years and even came in below the official central target...
8 Pages(2000 words)Essay

The Methods Open To a Government to Control the Rate of Inflation within an Economy

... impacts on the economy. UK economy, in recent years have consistently shown an increasing trends as the inflation has remained as high as 4.8% in March 2007. (Moneyextra, 2008). This general increase in the price levels within the economy has resulted in the widespread economic measures both by the Bank of England an the UK government including the raising of the interest rates by Bank of England and other measures to curb the inflation in the economy. This essay will look into some of the measures which UK government can take to contain the inflationary pressures on its economy. Firstly, we will be exploring the historical trends in the inflation within the UK and then based on the findings, means and ways will be suggested to control...
6 Pages(1500 words)Essay

Joining the Economic and Monetary Union and Inflation

...the scale of the price adjustment also both up and down was less significant than otherwise. Nevertheless both developed quickly back to the former patterns. On the divergent, this paper would find evidence of a decline in the resolution of the inflation progression in the mid-1990s. This also would be evidenced due to a structural alteration in private inflationary prospect due to policies associated to the groundwork of EMU. Regression Model analysis also been adjusted for Statistical analysis using an OLS- and a 2SLS. Main focus of the paper has addressed the question - How joining the Economic and Monetary Union of the European Union affects Inflation? Introduction: Joining the Economic and...
24 Pages(6000 words)Essay

Central Bank Independence and Inflation Targeting

...individual interested in the world fiscal movements. The main cause for this lay in the fact that the general rise in the variability as well as the general level of inflation, which largely depended on the increase in the oil prices, led to large concerns regarding the efficacy of the Central banks in fulfilling its commitment of controlling such inflationary tendencies (Posen, 1998). There was significant consensus on the opinion that central banks most of the larger economies had faced some incentives which had the capability of inherently leading to an ‘inflationary bias,’ and this bias had resulted in the high inflationary tendencies prevalent during the 1970s (Alesina & Summers, 1993). In essence the changes in the...
40 Pages(10000 words)Essay

Relationship between Money Supply and Inflation in Saudi Arabia

Over the recent past, the effects of money supply, debt and inflation have become contentious issues for debate. Furthermore, frequent cautions concerning the risk of very large budgetary deficits aver that this would send up the upcoming state debt and capital rate as indicated by the rates (interests). As a nation, Saudi Arabia has a bi and enduring budgetary deficit over the past two decades and the government has been forced to go into the market so as to have loan access and to make up for the deficits. Given the impact of this on inflation and other economic variables, it's imperative and of great alarm for strategy architects (strategists) to understand how microeconomics has an effect on money supply, financial plan defici...
10 Pages(2500 words)Speech or Presentation

Inflation Targeting

... is an economic policy in which a central bank estimates and sets public a project inflation rate and then tries to push the actual inflation towards the target by using interest rate changes and other monetary tool. As the interest rate and inflation rate are inversely related the likely moves of the central bank to raise or lower interest rates become more transparent under the policy of inflation targeting. The scenarios are; when inflation rates are above the target, the bank raises interest rates, this usually (but not always) affects over time on cooling the economy and bringing down inflation. And the opposite, when inflation appears below the target, the bank lowers interest rates, this usually (again, not always) affects over time...
8 Pages(2000 words)Coursework

Mortgage Inflation in the United States

... and along with the rise of interest rates mortgage rates also increased. The mortgage rates increased so much that at a point most borrowers were not able to repay their loans and they defaulted. This started the mortgage crisis in United States. The bursting housing bubble then led to the recession of 2008. The side effects of the recession were global and common people were affected as the result as prices increased and employment decreased. The solution lies in the tighter regulations regarding mortgage and investment companies. Mortgage Inflation in United States The housing crisis of 2008 was actually the starting point of a global recession with which the world is still fighting today. In this essay we will attempt to explain...
6 Pages(1500 words)Research Paper

The Inflation Rate and Exchange Rate of the Chinese Yuan and the US Dollar

... tools of trade to make wise decisions along the economic situations in the international markets. Inflation and stock markets are related because an increase in inflation results to subsequent decrease in the value of the stock market. The focus of the report is to evaluate the relationship of Chinese Yuan against the US dollar as far as the inflation rates and exchange rates are concerned. Aims and objectives of this report The overall objective in this report is to study the relationship between the inflation rate and exchange rate of the Chinese Yuan and the US dollar. The aims are to examine whether inflation has considerable influence and relationship to exchange rate of the nation in short or long run for China and USA...
10 Pages(2500 words)Research Paper

Unemployment and Inflation: Can We Find a Balance

...at the rate of crime, suicide and the divorce rate heighten when unemployment increases. (O’Sullivan et al, 2008) One of the other major impacts on the society of unemployment is the money that is spent by government in form of the unemployment benefits; it also signifies a loss in the tax earnings which then mean that there is less spending in an economy and the companies are getting lesser revenue, thus slow down in the economic activity as whole.  Inevitably when there is discussing about government expenditure on these stimulus programs and benefits to lower the unemployment levels, there evolves the problem of inflation. This is usually caused as the increased expenditure and lower revenues increase the national debt, which can...
7 Pages(1750 words)Coursework

Finance and Accounting: Gross Domestic Product and Inflation and Interest Rate

..., the slowing down of the global markets coupled with strengthened dollar, and in adequate growth in wages poses a challenge to sustained growth. Consequently, the US economic growth remains the main anchor of the global economic recovery (Bureau of Economic Analysis, 2015). Inflation and Interest Rate The federal government has the mandate of managing the monitory policy in a manner that offers maximum employment while at the same time stabilizing prices. This is done directing monetary policy to meet a specific rate of interest rate. According to the Economist (2015), the Federal Reserve targets an inflation of 2% to achieve both maximum employment as well stabilize prices. The...
7 Pages(1750 words)Term Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Inflation for FREE!

Contact Us