marketing
WHAT IS INFLATION?
INFLATION is a rise in the general level of prices of goods and services in an economy over a period of time when the general price level rises; each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.
CAUSES OF INFLATION FACTORS ON DEMAND SIDE:
Increase in money supply
Increase in disposable income
Deficit financing
Foreign exchange reserves
FACTORS ON SUPPLY SIDE:
Rise in administered prices
Erratic agriculture growth
Agricultural price policy
Inadequate industrial growth
EFFECTS OF INFLATION
Make it difficult for companies to budget or plan long-term.
The future purchasing power of money discourages investment and saving.
There can also be negative impacts to trade from an increased instability in currency exchange prices caused by unpredictable inflation.
Higher income tax rates.
SOLVING THE PROBLEM OF INFLATION
MONETARY POLICY : Monetary policy can control the growth of demand through an increase in interest rates and a contraction in the real money supply. Monetary measures of controlling the inflation can be either quantitative or qualitative. Bank rate policy, open market operations and variable reserve ratio are the quantitative measures of credit control.
CREDIT CONTROL:. Government can curb it’s expenditure to bring the inflation in control.
The government can also take some protectionist measures (such as banning the export of essential items such as pulses, cereals and oils to support the domestic consumption, encourage imports by lowering duties on import items etc.).
Reduction in Unnecessary Expenditure:
Increase in Taxes
Increase in Savings
Public Debt
To Increase Production
Rational Wage Policy
HOW CAN AN INDIVIDUAL SOLVE THE PROBLEM OF INFLATION
REVIEWING YOUR ENERGY EXPENSES
One way to save some
INFLATION is a rise in the general level of prices of goods and services in an economy over a period of time when the general price level rises; each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.
CAUSES OF INFLATION FACTORS ON DEMAND SIDE:
Increase in money supply
Increase in disposable income
Deficit financing
Foreign exchange reserves
FACTORS ON SUPPLY SIDE:
Rise in administered prices
Erratic agriculture growth
Agricultural price policy
Inadequate industrial growth
EFFECTS OF INFLATION
Make it difficult for companies to budget or plan long-term.
The future purchasing power of money discourages investment and saving.
There can also be negative impacts to trade from an increased instability in currency exchange prices caused by unpredictable inflation.
Higher income tax rates.
SOLVING THE PROBLEM OF INFLATION
MONETARY POLICY : Monetary policy can control the growth of demand through an increase in interest rates and a contraction in the real money supply. Monetary measures of controlling the inflation can be either quantitative or qualitative. Bank rate policy, open market operations and variable reserve ratio are the quantitative measures of credit control.
CREDIT CONTROL:. Government can curb it’s expenditure to bring the inflation in control.
The government can also take some protectionist measures (such as banning the export of essential items such as pulses, cereals and oils to support the domestic consumption, encourage imports by lowering duties on import items etc.).
Reduction in Unnecessary Expenditure:
Increase in Taxes
Increase in Savings
Public Debt
To Increase Production
Rational Wage Policy
HOW CAN AN INDIVIDUAL SOLVE THE PROBLEM OF INFLATION
REVIEWING YOUR ENERGY EXPENSES
One way to save some