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Effects Of Inflation Essay

explanatory Essay
1615 words
1615 words
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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.
The Gross Domestic Product (GDP) is the total market value of in a country’s output. The GDP is the total market value of all final goods and services produced by factors in within given period of time that located in the country doesn’t matter they are citizens or foreign-owned companies. Hence, the GDP is the best way to measure the country economy.

Inflation
The first effect is the purchasing power reduce. …show more content…

In this essay, the author

  • Defines inflation as the price of goods and services rising over monthly or yearly. inflation leads to a decline in the value of money, which increases our cost of living.
  • Explains that inflation reduces the purchasing power of consumers, especially for retirees and fixed-income consumers. inflation also influences business competitiveness.
  • Explains that unemployment is when a person lost their jobs and searching for employment. higher unemployment rate will lead to increased government borrowing, lower gdp, and loss of human capital.
  • Explains that the malaysian institute of economic research (mier) has forecast gdp is upwards 6.2% in the third quarter 2017 impelled by domestic demand.
  • Opines that inflation may increase the unemployment rate, as it affects economic recession, which means excessive labor supply would be difficult for workers to find a job.
  • Opines that higher unemployment rate will result in lower gdp for the economy and loss of human capital.
  • Opines that the growth of gdp will lead to lower unemployment because of increasing of job opportunities.

Unemployment rates is the number of unemployed people divided by the number of people in the labor force. According to IndexMundi (2018), the unemployment rate of whole world in year 2017 is 7.9%, which was increased 0.6% compare with year 2016.
Unemployment issue can lead to a lot of impacts to the economic growth. Higher unemployment rate will lead to increase government borrowing. When people are without their job, they would paid less in the income tax. So, it will cause a drop in tax revenue because there are lesser people paying income tax and spending less. Due to the loss of earnings to the unemployed, the government need to spend more subsidy for them in housing benefits and income support.
Lower GDP for the economy also one of the consequences of unemployment in current time. High rate of this issue implies the economy is operating below full capacity and inefficient so that it will lead to lower output and incomes. Because people who are searching for their work usually will spend less in purchasing goods and …show more content…

The main reason of job opportunities increasing is manufacturing, investment activities, financial market and economy situation of Malaysia is attracted to the foreigners. This will increase the wages and compensation of workers.
Because of the GDP growth too fast, increased wages of some citizens will lead to higher demand as consumers spend more freely. This will imply that the supply and demand will be increased and it will occur the shortage of supply. Business must hire more employees and further increasing demand by increasing wages. The increased demand will face of shortage supply and quickly forces prices up.
However, the GDP of country growth too rapidly also will negatively affect such as inequality of income increases to a significant level. This problem frequently facing due to economic development. This will let the rich people are getting more richer and poor are becoming poorer. Next, the economic develop rapidly also will increase of pollution rate. This is because the country is producing the maximum output for fulfilling the demand of the consumer. This will let the country has negative consequences for the environment and health of citizens is

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