Essay On Volatile Food

535 Words2 Pages

According to the article, the inflation rate for the volatile food is actually high which is 15.1% in Indonesia. The causes of this high inflation rate have resulted to supply problems; such as the consumer price index (CPI) is greatly influenced by the fluctuation of prices for volatile commodities, which are affected by two aspects those are weather and food supply. As a result they won’t be able to produce the product productively. Also, high inflation will threat to people’s purchasing power and will affect domestic consumption. From Diagram 1, it shows how the price level is increasing 15.1% (PL to PL1) and how this problem is driving up unemployment and inflation. However this will cause national output to shift to the left, which is unlikely situation in the Long run but for this Indonesia volatile food inflation the Y shifts left to Y1.

In the article it also mentions about the solution that they can come up with two different types of supply side policy. One is Long Run out GDP increasing and decreasing the SR inflation. In the two diagrams below it shows the solution.

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