Mls 2f Grp2 Inflation

GROUP 2: MLS 2F

BULACLAC, Mc Chelsea

LASERNA, Cita Mae

MONSALE, Marie Antoinette

TANTENGCO, Precious

INFLATION

WHAT IS INFLATION? (C) MLS2F.GROUPTWO.INFLATION

INFLATION is a sustained increase

in the cost of living or

the average / general

price level leading to a

fall in the purchasing

power of money

(C) MLS2F.GROUPTWO.INFLATION

WHAT ARE THE CAUSES?



CAUSES

DEMAND-

PULL

INFLATION

COST-PUSH

INFLATION

DEMAND-PULL INFLATION

It's simply when demand for a good or service

increases so much that it

outstrips supply. If sellers

maintain the price, they will

sell out. They soon realize

now have the luxury of

raising prices, creating

inflation.

if demand is growing

faster than supply, prices

and inflation will increase

over time.


COST-PUSH INFLATION


This isn't as common

as demand-pull inflation,

because it only occurs

when there is a shortage

of supply combined with

enough demand to allow

the producer to raise

prices

higher costs at

companies leads to higher

selling prices in order to

maintain margins, resulting

in rising inflation.


Cost push

inflation can

be caused by

many factors

Rising wages are a key cause of

cost push inflation because wages

are the most significant cost for

many firms. (higher wages may

also contribute to rising demand)

1. Rising

Wages


One third of all goods are imported in

the UK. If there is a devaluation then

import prices will become more

expensive leading to an increase in

inflation. A devaluation / depreciation

means the Pound is worth less,

therefore we have to pay more to buy

the same imported goods.

2. Import

prices (C) MLS2F.GROUPTWO.INFLATION

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.

3. Raw

Material Prices


4. Profit

Push

Inflation


If firms become less

productive and allow costs

to rise, this invariably leads

to higher prices.

5. Declining

productivity


If the government put up taxes,

such as VAT, this will lead to higher

prices, and therefore CPI will

increase.

6. Higher

taxes


Rising house prices do not

directly cause inflation, but they

can cause a positive wealth effect

and encourage consumer led

economic growth. This can

indirectly cause demand pull

inflation

Rising house

prices


If the Central Bank prints more money, you

would expect to see a rise in inflation. This

is because the money supply plays an

important role in determining prices. If

there is more money chasing the same

amount of goods, then prices will rise.

Hyperinflation is usually caused by an

extreme increase in the money supply

Printing more

money


Wages

Taxes

Raw materials

Profit margin


Demand-pull Cost-push

Black money

Disposable

Income

Dearness

allowance

RBIs Monetary

Policy


Inflation is famous for its negative effects

and destruction

but

It has some positive

aspects as well


POSITIVE EFFECTS


Increase in production due to inflation Increases the employment opportunities in

the country

Enhances the process of economic development

Increases the economic activities that may cause to inventions and innovations.

Profit of the producers also in increases when there is normal inflation


NEGATIVE

EFFECT


It is difficult for consumers to purchase more goods.

It generates very bad effects on the poor labour force

Inflation reduces the living standard and purchasing power of people

It is harmful for creditors Inflation reduces the purchasing power.

STATISTICAL UPDATE

Inflation Rate of the World


World Inflation Rate = 3.9%

developed countries 1.5% (2013 est.)

developing countries 5.6% (2013 est.) inflation in developed countries is 0% to 4% typically, in

developing countries, 5% to 10% typically; national inflation

rates vary widely in individual cases; inflation rates have

declined for most countries for the last several years, held

in check by increasing international competition from

several low wage countries, and by soft demand as a result

of the world financial crisis (2013 est.)


STATISTICAL UPDATE

Inflation Rate of Asia


STATISTICAL UPDATE

Inflation Rate of the Philippines


Mls 2f Grp2 Inflation

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