Effects Of Inflation
Joe Bardawil
Notre Dame University – Louize
January 15th, 2014
Outline
Economic Crisis and Inflation
Thesis statement: Economic crisis and inflation will lead to recession in macroeconomics aspect of a country, deterioration of the monetary value of the currency, and reduction of the purchasing power
I. Recession in macroeconomics aspect of a country
A. Definition of recession in macroeconomics
B. The effect of inflation on the recession
C. Possible solution
II. Deterioration of the monetary value of the currency
A. Nominal versus real value of the currency
B. Relationship between the inflation and the monetary value
C. The result of the inflation on the exchange rate
III. Reduction of the purchasing power
A. Definition of purchasing power
B. Consequence of inflation on the purchasing power
C. Social cost of inflation
In 1950, cars roughly cost $1,480, the average price of apartments was around $15,796, and the median yearly salary of a worker was $2,686. Let us take a look at the prices of these products today. Currently, cars cost $13,448, the average price of an apartment is around $143,530, and the median yearly salary is $24,406 1. This increase in the general prices of all goods and services is known as inflation. The percentage change prices is also known as the rate of inflation, varies over time and across countries. However, it carries the same end result to any country with inflation. Hyperinflation is when the rate of inflation rises rapidly and out of control which usually leads the concerned country to enter a quite problematic state. Keeping the inflation rate low has been the primary goal of government policies in order...
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...lation exists, it will cost more currency units to buy the same amount of goods and services. When the purchasing power decreases, the concerned country will enter into a weaker economic state.
With deterioration of the purchasing power, it will cause social and economic costs. People will tend to cut out on any leisure and luxury spending and will save money. This will lead to a lower standard of living.
In conclusion, almost all the countries have underestimated inflation and they have fallen under its negative effects. Economists usually assume all the variables when they study any aspect of the country, hopefully next time they make all necessary assumptions to avoid inflation. As stated above, inflation will lead to a recession in the macroeconomic aspects of a country, deterioration of the monetary value of the currency, and reduction of the purchasing power.
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These conditions have the ability to cause recession. Now that an armistice has been reached in Korea, a recession is beginning to occur (Pach and Richardson, 54). I believe that the President’s chief concern should not be to make an immediate and fast acting restoration of the general economy. The problems of the federal deficit and the recession must wait until the more important problems are dealt with. The problem at hand is the rising rate of unemployment.
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Second, the impact on the financial system. Bitcoin issuance and operation "decentralized", will challenge the bank's intermediary status. The value of account management, asset management and wealth management in the banking business will gradually decrease. There is no transaction fee for Bitcoin, that will also reduce the amount of remittance from the
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There are many factors that affect the economy, inflation is one of them. Basically inflation is risingin priceof general goods and services above a period.As we see value of money is not valuable for the next years due to inflation. Today every country has facing inflationary condition in their economy.GDP deflator is a basictool that tells the price level of final goods and services domestically produced in an economy.GDP is stand for gross domestic product final value of goods and services, Furthermore GDP deflator shows that how much a change in the base year's GDP relies upon changes in the price level. . Inflation in contrast, how speedy the average prices intensity is increases or changes above the period so the inflation rate define the annual percentage rate changes in the level of price is as measure by GDP deflator more over GDP deflator has a advantage on consumer price index because it isn’t only based on a fixed basket of goods and services. It’s a most effective inflation tool to identify the changes in consumer consumption and newly produced goods and service are reflected by this deflator. Consumer price index (CPI) is also measure the adjusting the economic data it can also be eliminate the effects of inflation, through dividing a nominal quantity by price index to state the real quantity in term.
Inflation is the rate at which the purchasing power of currency is falling, consequently, the general level of prices for goods and services is rising. Central banks endeavor to point of confinement inflation, and maintain a strategic distance from collapse i.e. deflation, with a specific end goal to keep the economy running smoothly.
Inflation is one of the most important economic issues in the world. It can be defined as the price of goods and services rising over monthly or yearly. Inflation leads to a decline in the value of money, it means that we cannot buy something at a price that same as before. This situation will increase our cost of living.