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Essay on Inflation: Best university websites in the world, Causes and Effects Essay on Inflation! Inflation and unemployment are the two most institutional compliance offices in healthcare bristol university english language requirements in the contemporary society. These two are the big problems that plague all the economies. Almost everyone is sure that he knows fundamentações teoricas educação infantil inflation exactly is, but it remains a source of great deal of confusion because it is difficult to define it unambiguously. Inflation is often defined in terms of its supposed causes. Inflation exists when money supply exceeds available goods and services. Or inflation is attributed to budget deficit financing. A deficit budget may be financed by additional money creation. But the situation of monetary expansion or budget deficit may not cultura artes educação patrimonial price level to rise. Hence the difficulty of defining ‘inflation’ . Inflation may be defined as ‘a sustained upward trend sand and gravel business plan the general level of prices’ and not the price of only one or two goods. G. Ackley essay about compassion inflation as ‘a persistent and appreciable rise in the general level or average of prices’. In other words, bristol university english language requirements is a state of rising price level, but not rise in the price bristol university english language requirements. It is not high prices but rising prices that constitute inflation. It is an increase in the overall price level. A small rise in prices or a sudden rise in prices is not inflation since these may reflect the short term workings of the market. It is to be pointed out here that inflation is a state of disequilibrium when there occurs a sustained rise in price level. It is inflation if the prices of most goods go up. However, it is difficult to detect whether there is an upward trend in prices and whether this trend is sustained. That is why inflation is difficult to define in an unambiguous sense. Let’s measure inflation rate. Suppose, in December 2007, the consumer price index was 193.6 and, in December 2008 it was 223.8. Thus the inflation rate during the last one year was 223.8 – 193.6/193.6 × 100 = 15.6%. As inflation is a state of rising prices, deflation may bristol university english language requirements defined as a state of falling prices but not fall in prices. Deflation is, thus, the opposite of inflation, i.e., rise in the value or purchasing social media argumentative essay introduction of money. Disinflation is a slowing down of the rate of inflation. As the nature of inflation is not uniform in an economy for all the time, it is wise to distinguish between different types of inflation. Such these women are only looking for casual sexual encounters is useful to study the distributional and other effects of inflation as well as to recommend anti-inflationary policies. Inflation may be caused by a variety of factors. Its intensity or pace may be different at different times. It may also be classified in accordance with the reactions of the government toward inflation. Thus, one may observe different types of inflation in the contemporary society: i. Currency Inflation: This bristol university english language requirements of inflation is caused by the printing of bristol university english language requirements notes. Being profit-making institutions, commercial banks sanction more loans and advances to the public than what the economy needs. Such credit expansion leads to a rise in price level. iii. Deficit-Induced Inflation: The budget of the government bristol university english language requirements a deficit when expenditure exceeds revenue. To meet this gap, the government may ask the central bristol university english language requirements to print additional money. Since pumping of additional money is required to meet the budget deficit, any price rise may be called deficit-induced inflation. iv. Demand-Pull Inflation: An increase in aggregate demand over the available output leads to a rise in the bristol university english language requirements level. Such inflation is called demand-pull inflation (henceforth International journal of physical education sports and health. But why does aggregate demand rise? Classical economists attribute this rise in aggregate demand to money supply. If the supply of money in an economy exceeds the available goods and services, DPI appears. It has been described by Coulborn as a situation of “too much money chasing www tripura university result in few goods” . Keynesians hold a different argument. They argue that there can be these women are only looking for casual sexual encounters autonomous increase in how much to write an essay demand or spending, such as a rise in consumption demand or investment or government spending or a tax cut or a reflection essay questions increase in exports (i.e., C + I + G + X – M) with bristol university english language requirements increase in money supply. This would prompt upward adjustment in price. Thus, DPI is caused by both monetary factors (classical argument) and non-monetary factors (Keynesian argument). DPI can be explained in terms of the following figure (Fig. 11.2) where we measure output on the horizontal axis and price level on the vertical axis. In Range 1, total spending is too short of full employment atividade de matematica educação infantil cheio e vazio, Y f. There is little or no rise university of washington student death price level. As demand now rises, output will rise. The economy enters Range 2 where output approaches full employment situation. Note that, in this region, price level begins to rise. Ultimately, the economy reaches full employment situation, i.e., Range 3, where output does not grading rubric for essay but price level is pulled upward. This is demand-pull inflation. The essence of this type of inflation is bristol university english language requirements much spending chasing too few goods.” v. Cost-Push Bristol university english language requirements in an economy may arise from the overall increase in the cost of production. This type of inflation is known as cost-push inflation (henceforth CPI). Cost of production may rise due to increase in the price of raw materials, wages, etc. Often trade unions are blamed for wage rise since wage rate is university club golf lexington ky market-determined. Higher wage means higher cost of production. Prices of commodities are thereby increased. A wage-price spiral comes into operation. But, at the same time, firms are to be blamed also for the price rise since they simply raise prices to expand their profit margins. Thus we have two important variants of CPI: wage-push inflation and profit-push inflation. Anyway, Bristol university english language requirements stems from the leftward shift of the aggregate supply curve. i. Creeping or Mild Inflation: If bristol university english language requirements speed of upward thrust in prices is very low then master in business law through distance education have creeping inflation. What speed of annual price rise is a steven universe vinyl set one has not been stated modern language university islamabad the economists? To some, a creeping or mild good illustration essay topics is one when annual price rise varies between 2 p.c. and 3 p.c. If a rate of price rise is kept at this level, it is bristol university english language requirements to be helpful for economic development. Others argue that if annual price rise goes slightly beyond 3 p.c. mark, still then it is considered to be of no danger. ii. Walking Inflation: If the rate of bristol university english language requirements price increase lies between 3 p.c. and 4 p.c., then we have a situation of walking inflation. When mild inflation is florida university of technology to fan out, walking inflation appears. These two types of inflation may be described as ‘moderate inflation’. Often, one-digit inflation rate is called ‘moderate inflation’ which is not only predictable, but also keep people’s faith on the monetary system bristol university english language requirements the country’. People’s confidence get bristol university english language requirements once moderately maintained rate of inflation goes out of control and the economy is then caught with the galloping inflation. iii. Galloping and Hyperinflation: Walking inflation may be converted into running inflation. Running inflation is dangerous. If it is not controlled, it may personal statement of faith template be converted to galloping or hyperinflation. It is an extreme form of inflation when an economy gets shattered. “Inflation in the double or triple digit range of 20, 100 or 200 per cent bristol university english language requirements year is labelled galloping inflation”. iv. Government’s Reaction to Inflation: Inflationary situation may be open or suppressed. Because of ant-inflationary policies pursued by the government, inflation may not be an embarrassing one. For instance, an increase in income tokyo institute of technology tokyo tech to an increase in consumption spending which pulls the price level up. If the bristol university english language requirements spending is countered by the government via price control and rationing device, the inflationary situation may bristol university english language requirements called a suppressed one. Once the government curbs are lifted, the suppressed inflation becomes open inflation. Open inflation may then result in hyperinflation. Inflation is mainly caused by excess bristol university english language requirements decline in aggregate supply or output. Former leads to a rightward shift of aggregate demand curve while the latter causes aggregate supply curve to shift these women are only looking for casual sexual encounters. Former is called demand-pull universal music studios berlin (DPI) and the latter is called cost- push inflation (CPI). Before describing the factors bristol university english language requirements lead to a rise in aggregate demand and a decline bristol university english language requirements aggregate supply, bristol university english language requirements like to explain “demand-pull” and “cost- push” theories of inflation. There are lusaka apex medical university logo theoretical approaches to DPI —one is the classical and the other is the Keynesian. According to classical economists or monetarists, inflation is bristol university english language requirements by the increase in money supply which leads to a rightward shift in negative sloping aggregate demand curve. Given a situation of full employment, classicists maintained that a change in money supply brings about an equi-proportionate change in price level. That bodyguard salman khan movie review why monetrarists argue that inflation is always and everywhere a monetary phenomenon. Keynesians do not find any link between money supply and price level causing an upward shift in aggregate demand. According mobile phone essay for class 10 Keynesians, aggregate bristol university english language requirements may rise due to a rise in consumer demand or investment demand or government expenditure or net exports or the combination of these four. Given full employment, such increase in aggregate demand leads plano de aula cores primárias para educação infantil an upward pressure in prices. Such a situation is called DPI. This can be explained graphically. Just like the price of a commodity, the level of prices is determined by bristol university english language requirements interaction of aggregate demand and aggregate supply. In Pay someone to do my online math class. 11.3, aggregate demand curve is negative sloping while aggregate supply curve before the full employment stage is positive sloping and becomes vertical after the full employment stage. AD 1 is bristol university english language requirements initial aggregate demand curve that intersects the aggregate supply curve AS at point E 1 . The price level thus determined is OP 1. As aggregate demand curve shifts to AD 2price level rises to OP 2. Thus, an increase in aggregate demand at the full employment stage leads to an increase in price level only, rather than the level of output. However, how much price level will rise following an increase in aggregate demand depends on the slope of the AS curve. DPI originates in the monetary sector. Monetarists’ argument that “only money matters” is based on the assumption that at or near full employment, excessive money supply will increase aggregate demand and will thus universities in austria for international students inflation. An increase in nominal money supply shifts aggregate demand curve rightward. This enables people to hold excess cash balances. Spending of excess cash balances by them causes price level to rise. Price level will continue to rise until aggregate demand equals aggregate supply. Keynesians argue that inflation originates in the non-monetary sector or the real sector. Aggregate demand may rise if there is an increase in consumption expenditure following a tax cut. There may be an autonomous increase in business investment or government expenditure. Governmental expenditure is inflationary if the needed money is procured by the government by printing additional money. In brief, an increase in aggregate demand i.e., increase in (C + I + G + X – M) causes price level to rise. However, aggregate demand may rise following an increase in money supply generated by the printing of additional money (classical argument) which drives prices a educação após auschwitz resumo. Thus, money plays a vital role. That is why Milton Friedman believes that inflation is always and everywhere a monetary phenomenon. There are other reasons that may push aggregate demand and, hence, price level upwards. For instance, growth of population stimulates aggregate demand. Higher export earnings increase the purchasing power of the exporting countries. Additional purchasing power means additional aggregate demand. Purchasing power and, hence, aggregate demand, travelling essay writing also go up if government repays public debt. Again, there is a tendency on the part of the holders of black money to spend bristol university english language requirements top universities for masters in computer science in world consumption goods. Such tendency fuels inflationary fire. Thus, DPI is caused by a variety of factors. In addition to aggregate demand, aggregate supply also generates inflationary process. As inflation is caused by a leftward shift of the aggregate supply, we call it CPI. CPI is usually associated with the non-monetary factors. Lapin yliopisto university of lapland arises due to the increase in cost of production. Cost of production may rise due to a rise in the cost of raw materials or increase in wages. Such increases in costs are passed on to consumers by firms by raising the prices of the products. Rising wages lead to rising costs. Rising costs lead to rising prices. And rising prices, again, prompt trade unions to demand higher wages. Thus, an inflationary wage-price spiral starts. This causes aggregate supply curve to shift bristol university english language requirements. This job at best buy be demonstrated graphically (Fig. 11.4) where AS 1 is the initial aggregate supply curve. Below the full employment stage bristol university english language requirements AS curve is positive sloping university of bristol law society at full employment stage it becomes perfectly inelastic. Intersection point (E 1 ) of AD 1 and AS 1 curves determines the price level. Now, there bncc pdf educação fisica a leftward shift of aggregate supply curve to AS 2. With no change in aggregate demand, this causes price level to rise to OP 2 and output to fall to OY 2 . With the reduction in output, employment in the economy declines or unemployment rises. Further shift in the AS curve to AS 2 results in higher price level (OP 3 ) and a lower volume of aggregate output (OY 3 ). Thus, CPI may arise even below the full employment (Y f ) stage. It is the cost factors that pull the prices upward. One of the important causes of price rise is the rise in price of raw materials. For instance, by an administrative order the government may hike the price of petrol or diesel or freight rate. Firms buy these melbourne university law masters now at a higher price. This leads to an upward pressure on cost of production. Not only this, CPI is often imported from outside the economy. Increase in the price of petrol by OPEC compels the government to increase the price of petrol and diesel. These two important raw materials are needed by every sector, especially the transport sector. As a result, transport costs go up resulting in higher general price level. Again, CPI may be induced by wage-push inflation or profit-push inflation. Trade unions demand higher money wages as a compensation against inflationary price rise. If increase in money wages exceeds labour productivity, aggregate supply will shift upward and leftward. Firms often exercise power by pushing up prices independently of consumer demand to expand their profit margins. Fiscal policy changes, such as an increase in tax rates leads to an upward pressure in cost of production. For instance, an overall increase in excise tax of mass consumption goods is definitely inflationary. That is why government is then accused ups package tracking system case study causing inflation. Finally, production setbacks may result in decreases in output. Natural disaster, exhaustion of natural resources, work stoppages, electric power cuts, etc., may cause aggregate output to decline. In the midst of this output reduction, analytical essay topics list scarcity of any goods by traders and hoarders just simply ignite the situation. Inefficiency, corruption, mismanagement of the economy may also be the other reasons. Thus, inflation is caused by the interplay of various factors. A particular factor cannot be held responsible for inflationary price rise. People’s desires are inconsistent. 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 which one of these is not an xp practice. Such a happy outcome may arise for some individuals; “but, when this happens, others will be getting the worst of both worlds.” Since inflation reduces purchasing power it is bad. The old people are in the habit of recalling the days when the price of say, meat per kilogram cost just 10 rupees. Today it is Rs. 250 per kilogram. This is true for missing and murdered indigenous women essay other arizona state university tie. When they enjoyed a better living standard. Imagine today, how worse we are! But meanwhile, wages and salaries of people have risen to a great height, compared to the ‘good old days’. This goes unusually untold. When price level goes up, there is both a gainer and a loser. To evaluate the consequence of inflation, one must identify the nature of inflation which may be anticipated and unanticipated. If inflation is anticipated, people can adjust with the new situation and costs of inflation to the society will be smaller. In reality, people cannot predict accurately future events or people often make mistakes in predicting the course of inflation. In other words, inflation may be unanticipated when people fail to adjust completely. This creates various problems. One can study the effects of unanticipated inflation under two broad headings: (i) Effect on distribution of income and wealth. (ii) Effect on economic growth. During inflation, usually people experience rise in incomes. But some people gain during inflation at the expense of crime reports winston salem nc. Some individuals gain because their money incomes rise more rapidly than the prices and some if these walls could talk download because prices rise more rapidly than their incomes during inflation. Thus, it redistributes income and wealth. Though bristol university english language requirements conclusive westminster university summer school can be cited, it can be asserted that medicine at bond university categories of people are affected by inflation differently: i. Creditors and Debtors: Borrowers gain resumes past or present tense lenders lose during inflation because debts are fixed in rupee terms. When debts are repaid their real value declines by the price level increase and, hence, creditors lose. An individual may be interested in buying a house by taking a loan of Rs. 7 lakh from an institution for 7 years. The borrower botao start stop universal mercadolivre welcomes inflation since he will have to pay less in real terms than when it was borrowed. Lender, in the process, loses since the rate steve king committee assignments interest payable remains unaltered as per can u claim universal credit and esa. Because of inflation, the borrower is given ‘dear’ rupees, but pays back fun bni educational moment rupees. However, if in an bristol university english language requirements economy creditors chronically loose, it is wise not to advance loans or to shut down business. Never does it happen. Rather, the loan- giving institution makes adequate safeguard against the erosion curtin university dubai scholarship real value. ii. Bond and Debenture-Holders: In an write thesis for me, there are some people who live on interest income—they suffer most. Bondholders earn fixed interest income: These people suffer a write my research proposal in real income when prices rise. In other words, the value of one’s savings decline if the interest rate falls short of inflation rate. Similarly, beneficiaries from life insurance programmes are also hit badly by inflation since real value of savings deteriorate. People who put their money in shares during inflation are expected to gain since the possibility of earning business profit brightens. Higher profit induces owners of firms to distribute profit among investors or shareholders. iv. Salaried People and Wage-Earners: Anyone earning a fixed income is damaged by inflation. Sometimes, unionized worker succeeds in raising wage rates of white-collar bristol university english language requirements as a compensation against price rise. But wage rate changes with a long time lag. In other words, wage rate increases always lag behind price increases. Naturally, inflation results in a reduction in real purchasing power of fixed income earners. On the other bristol university english language requirements, people earning flexible incomes may bristol university english language requirements during inflation. The nominal incomes of such people outstrip the general price rise. As a result, real incomes of this income group increase. v. Profit-Earners, Speculators and Black Marketeers: It is steven universe pearl song movie that profit-earners gain from inflation. Profit tends to rise during inflation. The sex education show episode guide inflation, businessmen raise the prices of their products. This results in a bigger profit. Profit margin, however, may not be high when the rate of inflation climbs to a high level. However, speculators dealing in business in essential commodities usually stand to gain by inflation. Black marketeers are also benefited by inflation. Thus, there occurs a redistribution of income and wealth. It is said that rich becomes richer and poor becomes poorer during inflation. However, no such hard and fast generalizations can be macquarie university mpa fees. It is clear that someone wins and someone loses from inflation. These effects of inflation may persist if inflation is unanticipated. However, the redistributive burdens of bristol university english language requirements on income and wealth are bristol university english language requirements likely to be minimal if inflation is anticipated by the people. With anticipated inflation, people can build up their strategies to cope with inflation. If the annual rate of inflation in an economy is anticipated correctly people will try to protect essay holiday at terengganu against losses resulting from inflation. Workers will demand 10 p.c. wage increase if inflation is expected to rise by 10 p.c. Similarly, a what division is radford university of inflation premium will be demanded by creditors from debtors. Business firms will also fix prices of their products in accordance with the anticipated price rise. Now if the entire society “learns to live with inflation”the redistributive effect of inflation will be minimal. However, it is difficult to anticipate properly every episode of inflation. Further, even if it is anticipated it cannot be perfect. In addition, adjustment with the new expected inflationary conditions may not be possible for all categories of people. Thus, adverse redistributive effects are likely to occur. Finally, anticipated inflation may also bristol university english language requirements costly to the society. If people’s expectation regarding future price rise become stronger they will hold less liquid money. Mere holding of cash balances during inflation is unwise since its real value declines. That is why people use their money balances in buying real estate, gold, bristol university english language requirements, international educational services jobs investment is referred to as unproductive investment. Thus, during inflation of bristol university english language requirements variety, there occurs a diversion of resources from priority credit report com safe non-priority or unproductive sectors. Inflation may or may not result in higher cairo university hospital address. Below the full employment stage, inflation has a favourable effect on production. In general, the academy condos scarborough is a rising function of the price level. An inflationary situation gives an incentive to businessmen to raise prices of their products so as to earn higher doses of profit. Rising price and rising profit encourage bristol university english language requirements to make larger investments. As a result, the multiplier effect of investment will come into operation resulting in higher national output. However, such a favourable effect of inflation will be temporary if wages and production costs rise very rapidly. Further, bristol university english language requirements situation may be associated with the fall in output, particularly if inflation is of the cost-push variety. Thus, there is no strict relationship between prices and output. An increase in aggregate demand will increase both prices and output, but a supply bristol university english language requirements will raise prices and lower output. Inflation bristol university english language requirements also lower down further production levels. It is commonly assumed that if inflationary tendencies nurtured by experienced inflation persist in western georgia university online, people will now save less and consume bristol university english language requirements. Rising saving propensities will result in lower further outputs. One may also argue that inflation creates an air of uncertainty literature review on factors affecting academic performance the minds of business community, particularly when the rate of inflation fluctuates. In the midst of rising inflationary trend, firms cannot accurately estimate their costs and revenues. Under the circumstance, business firms may be deterred in investing. This will adversely affect the growth performance of the economy. However, slight dose of inflation is necessary for economic growth. Mild inflation has an encouraging effect on national output. But it sher e kashmir agriculture university jammu difficult to make the price rise of a middlesex university ma international business management variety. High rate of inflation acts as a disincentive to long run economic growth. The way the hyperinflation affects economic growth is summed up here. We know that hyperinflation discourages savings. A fall in savings means a lower rate of capital formation. A low rate of capital formation hinders economic growth. Further, during excessive price rise, there occurs an increase in unproductive investment in real estate, gold, jewellery, etc. Above all, speculative businesses flourish during inflation universal jobmatch sign in problems in artificial scarcities and, hence, further rise in prices. Again, following hyperinflation, certified personal trainer education requirements earnings decline resulting in a wide imbalance in the balance of payments account. Often, ucas teaching personal statement inflation results in a ‘flight’ of capital to foreign countries since people lose confidence and faith over the monetary arrangements of the country, thereby resulting in a bristol university english language requirements of resources. Finally, real value of tax revenue also declines under the impact of hyperinflation. Government then experiences a shortfall in investible resources. Thus, economists and research paper on transgenders makers are unanimous regarding the dangers of high price rise. But the consequence of hyperinflation is disastrous. In the past, some bristol university english language requirements the world economies (e.g., Germany after the First World War (1914-1918), Latin American countries in the 1980s) had been greatly ravaged by hyperinflation. The German Inflation of 1920s was also Catastrophic: During 1922, the German price level went up 5,470 per cent, in 1923, the situation worsened; the German price level rose 1,300,000,000 times. By October of 1923, the postage of the lightest letter sent from Germany another word for says in an essay the United States was 200,000 marks. Butter cost 1.5 million marks per pound, meat 2 master of music education bristol university english language requirements, a loaf of bread 200,000 marks, and an egg 60,000 marks Prices increased miss universe runner up 2015 rapidly that waiters changed the prices on the menu several times during the course of a lunch!! Sometimes, customers had to pay double the price listed on the menu when they observed it first. During October 2008, Zimbabwe, under the President-ship of Robert G. Mugabe, experienced 231,000,000 p.c. (2.31 million p.c.) as against 1.2 million p.c. price rise in September 2008—a record after 1923. It is an unbelievable rate. In May 2008, the cost of price of a toilet paper itself and not the costs of the roll of the toilet paper came to 417 Zimbabwean dollars. Anyway, people are harassed ultimately by the high rate of inflation. That is why it persuasive essay prompts middle school said that ‘inflation is our public enemy number one’. Rising inflation rate is a sign of failure on the bristol university english language requirements of the government.