inflation bsa2-2 ( salmorin, galon, tendras)
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INFLATION
DEFINITIONS KINDS/CAUSES OF INFLATION
POSITIVE EFFECTS OF INFLATION
NEGATIVE EFFECTS OF INFLATION
STATISTICS INFLATION RATE & PURCHASING POWER of the PESO
SOLUTIONS
DEFINITIONS
Inflation is a sharp sudden increase of money or credit or both without a corresponding increase in business transaction.
-Webster’s Dictionary
DEFINITIONS
Inflation is defined as a sustained increase in the general level of prices for goods and services.
-STANLIB
DEFINITIONS Inflation is the long term rise in the prices of goods and services caused by the devaluation of currency.
- MONEY CRASHERS
DEFINITIONS Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.
- INVESTOPEDIA
DEFINITIONS Inflation is an economic condition wherein the general price level persistently rises as the value of money decreases.
“Inflation means that your money won’t buy as much today as you could yesterday. ”
- ECONOMIC.HELP
KINDS/CAUSES OF INFLATION1. Cost-push Inflation.
caused when costs of production (e.g., wage rates and raw materials) are pushed upward significantly.
KINDS/CAUSES OF INFLATION2. Demand-pull Inflation.
the aggregate demand simply overwhelms aggregate supply.
"too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase.
KINDS/CAUSES OF INFLATION
3.Structural Inflation.
takes place when productivity in a major producing sector in the economy is impaired.
POSITIVE EFFECTS OF INFLATION
Moderate inflation enables
adjustment of wages.
Inflation enables adjustment of
relative prices.
Inflation can boost growth.
High inflation tends to wipe out
debt.
NEGATIVE EFFECTS OF INFLATION
Inflation tends to discourage
investment and long term economic
growth.
Inflation can make an economy
uncompetitive.
Reduce value of savings.
Unemployment
Business uncertainty
NEGATIVE EFFECTS OF INFLATION
Hoarding
Social Unrest
Income redistribution
Negative real interest rates
Cost of borrowing
Risks of wage inflation
Business competitiveness
STATISTICS
INFLATION RATEInflation rate • the annual rate of change or year-on-year change in consumer price index (CPI).
PURCHASING POWER OF PESO Purchasing Power of Peso (PPP)
• is the amount of goods and services that one peso can buy at present.• the value of the peso in the base period.
SOLUTIONS Monetary Policies
o control the rise in demand, by increasing the rates of interest and reducing the supply of real money.
Fiscal Policiesoreduction in the Demand-Pull Inflation, in
terms of increasing unemployment and slackening the economic growths.
Exchange Rateso increasing the rates of interest or buying
money through the central bank interferences in the foreign exchange markets.
SOLUTIONS Wage Control
o limiting wage growth can help to moderate
inflation.
Monetarism
o seeks to control inflation through controlling the
money supply.
Supply Side Policies
oenable the economy to become more competitive
and help to moderate inflationary pressures.
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