This essay explores the inflation, the major causes of inflation and how to solve the issue of inflation. It is evidently clear from the discussion that the major causes of inflation are the demand-pull inflation and the cost-push inflation…
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This paper illustrates that the effects of inflation are faced by everyone in the economy. The producers of the goods and services increase their productivities to earning the more profits in the situation of higher prices. The situation also creates an inequality in the society, as the poor become poorer and rich become richer. It not only affects the economy internally but also disturbs the balance of trades and the exchange rates of money. The situation of demand-pull inflation arises in the results of the increase in the aggregate demand, but the supply remains same in the markets. So the prices rise, and the situation of inflation occurs. If the costs of the production rise in the market, then the prices of factors of productions also increase. Increase in costs of productions results in the rise of goods and services prices in the public markets. To solve the issue of inflation, the government has to introduce new strategies of fiscal as well as monetary policies. Through these policies, the profits of savings are increased in the banks, and then the people save more for profits. A rate of interests is also fixed at the low ratio, so the investors start new businesses to maintain the level of demand and supply in the market.
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Simply put, inflation refers to the rise in the prices of goods and services in a given economy for a given period of time. When such a thing happens, it therefore means that each unit of currency in that particular economy buys fewer goods than what it could have purchased initially before the inflation.
There are different economic variables that affect the lives of people. One of those variables is inflation. Inflation can be defined as a persistent substantial rise in the general levels of prices (Dictionary).
Types of inflation Demand-pull inflation This type of inflation occurs when the demand overwhelms supply, it makes the prices of commodities, and or services to rise. The increase in demand with respect to low supply will consequently lead to excess demand.
Inflation and its Causes
Inflation has been one of the major subjects that have been addressed in the economic world and in order to properly understand it, one has to delve into all the aspects that are related to it. The paper will also look into the effects that inflation has on the economy and by extent the society as a result as it attempts to discover ways in which this situation brings about a difference in the way individuals live their lives.
Even developed countries and rapidly emerging countries are not free from the problems generated by inflation. China is the most rapidly developing country in the world at present. Yet, “China's inflation rate hit a 10-month high in February, as Lunar New Year festivities drove up food prices.
The main cause of inflation is the increase in quantity of money supplied in the economy. The costs of inflation to the public include menu costs, shoeleather costs, inefficient allocation of resources, redistribution of income, uncertainty, and distortion of tax payments.
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Economists term this phenomenon as inflation. Purchasing power of money falls in this period and as a result money buys less than it was buying before. (Lipsey and Chrystal, 2003)
In an ordinary economic cycle, every boom is followed by a
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The combustion engines of most automobiles utilize fossil fuels, which produced greenhouse gases upon releasing energy. These greenhouse gases accumulate at a certain zone in the higher atmosphere and trap sunlight received by the earth. This phenomenon of increased temperature is called Global Warming.
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