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Inflation has many components, in Brazil indexation was seen as their reason of high inflation rates so the plan was introduced, because of the rates in a period before sellers will assume that the rates may be the same and would factor that index in their prices, doing this the rates remained higher and sometimes where higher because of this assumption. There were three key elements to the plan being a success 1) fiscal strategy 2) monetary reform and 3) Opening the economy (Brazil Travel).
These strategies had positive and negative outcomes for the economy and the people in Brazil. The fiscal strategy which was based on Constitutional Amendments #17 approved on November 22, 1997 which changed articles 71 and 72 of the Temporary Constitutional Provisions to extend the period of the Social Emergency Fund was to be used for economic and social interest. Among the many positives of this strategy the reform of social security of the public sector and labour legislations among others failed.
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Male 2008-11 Female 2008-11
Male 2008-11 Female 2008-11
Youth unemployment age 15-24
Long term unemployment (%of Total unemployment)
(CIA Fact book)
The table above shows that in the period male unemployment was 5% and females stood at 9% in the single digits, youth unemployment between the ages of 15-24 among male was 12% and female at 20% but total long term unemployment is 1%, a great achievement for the government of Brazil. (CIA Factbook).
In Brazil according the monetarist the reduction in unemployment caused inflation rates to increase because the government was not borrowing from the banks which are causing the interest rates to go up because of the additional supply of bonds which in turn caused a reduction in private investments and that resulted in less output in the economy. National income which is affected by a change in the supply of money will increase if the government continues borrowing and creating cash (Robinson Rojas2013).