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InflationMLS2E Group 2:

Lumbo, Angelie

Pendon, Chryzta Lyne

Sanao, Angie Lyn

Sercedillo, Paulene

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o It is the percentage change in the value of the Wholesale Price Index (WPI) on a year-on year basis.

o It effectively measures the change in the prices of a basket of goods and services a year.

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consumers. good economy.

Inflation occurs due to the imbalance between demand and supply of money, changes in production and distribution cost or increase in taxes on products.

When the economy experiences inflation, i.e when the price level of goods and services rises, the value of currency reduces. This means now each unit of currency buys fewer goods and services.

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Causes Demand Pull Inflation Cost Push Inflation

Rising Wages Import Prices Raw Material Prices Profit Push Inflation Declining Productivity Higher taxes

Rising House Price Printing More Money

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Demand pull inflation• If the demand is at close to full employment then an

increase in AD leads to an increase in the price level.• We can have a demand pull inflation , if growth is above the

long run trend rate of growth.• The long run trend rate of economic growth is the average

sustainable rate of growth and is determined by the growth in productivity.

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Cost Push Inflation It happens when there is an increase in the costs of firms, then

firms will pass this on to consumers. There will be a shift to the left in the AS.

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Factors of Cost push inflation

1. Rising wages

If trades unions can present front then they can bargain for higher wages.

2. Import Prices

If there is a devaluation then import prices will become more expensive leading to an increase in inflation.

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3. Raw Material Prices

The best example is the price of oil, if the oil price increase by 20% then this will have a significant impact on most goods in the economy and this will lead to cost push inflation.

4. Profit Push Inflation

When firms push up prices to get higher rates of inflation.eclining

5. Declining Productivity

If firms become less product and allow costs rise, this invaribly leads to higher prices.

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6. Higher taxes

If the government put up taxes, such as VAT and Excise duty, this will lead to higher prices, and therefore CPI will increase. There is even a measure of inflation (CPI-CT) which ignores the effect of temporary tax rises/decreases.

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Rising house prices• Do not directly cause inflation, but they can cause a

positive wealth effect and encourage consumer led economic growth.

Printing more money

If the central bank prints more money , you would expect to see a rise in inflation. Hyperinflation is usually caused by an extreme increase in the money supply.

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Effects of Inflation• Reduces the value of money• Lose of purchasing power• Redistribution of income• Redistribution between debtors and creditors• Discourage investments and long term economic growth

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EFFECT ON HEALTH

• Less access to health• Prevalence of diseases• Increase in morbidity and mortality rate

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4.1 4.4

5.0

9.0

2.93.5

5.0

3.7

2.6

Inflation, consumer prices (annual %) Inflation as measured by the consumer price index reflects the annual percentage change in the cost to the average consumer of acquiring a basket of goods and services that may be fixed or changed at specified intervals, such as yearly.

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5.5 5.4 5.6

8.2

2.4

4.7

Inflation, GDP deflator (annual %) Inflation as measured by the annual growth rate of the GDP implicit deflator shows the rate of PRICE change in the economy as a whole.

5.7

3.4

2.3

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Inflation in asia

Central bank discount rates, Asia and the Pacific, 2011 and 2012

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Change in average exchange rates against the United States dollar, Asia and the Pacific, 2012

The Federated States of Micronesia is the only Asian and Pacific country to use the United States dollar as its national currency.

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In Philippines, there is most important categories in the Consumer Price Index

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Philippines Consumer Price Index (CPI) 1957-2015

In Philippines, the Consumer Price Index or CPI measures changes in the prices paid by consumers for a basket of goods and services.

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