Inflation is one of the major problems in macroeconomics. Generally in theory, inflation is an increase in the overall price level and it is calculated based on the Consumer Price Index (CPI). Inflation and economic growth are incompatible. Government around the world will take action to minimize the negative impact of inflation to a certain extent when inflation is expected to be happened. Low inflation rate and upward economic growth is impossible in reality (“Inflation and Economic Growth”, 2010).
An article in April 2014 said that the major concerns of the average Malaysian is the rising of living. The subsidy rationalism programme has led to a 3.5% of inflation in March 2014 and it creates fear that the implementation of Goods and Services
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The Minister in the Prime Minister’s Department, Idris Jala warned that Malaysia may go bankrupt by 2019 unless the government cut subsidies or restrict borrowing. Therefore, government has now tried to strengthen the fiscal position by implementing the goods and services tax (GST) which is effective from 1 April 2015 and the program of subsidy rationalism. A study shows that the implementation of fiscal reform will hit the middle-income group most badly. Although the official inflation will increase, it would not reflect the true impact of the reform on prices, since the Consumer Price Index includes items that excluded from GST (Nambiar, 2014). However, there are still some predictions that the fiscal reform in Malaysia will bring impact on inflation rate to the country in 2015.
Although the inflation rate in Malaysia fell to 2.6% in September 2014, it was expected to grow again due to the hike in fuel and petrol price in October and the implementation of GST in 2015. The inflationary pressure will continue to build up in Malaysian economy over the next two years. The Economic report forecasted that the inflation will be at between 4% and 5% in year 2015. Most economists suggested that the official CPI is expected to soar beyond the forecasted figure and the urban inflation will definitely be higher (Taing,
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This is because they worry about the rise in price and their ability to cope with GST. Besides, there is expectation that the government will announce another round of subsidy cuts which targeted high income group. Hence, the consumer consumption will likely to grow slower in 2015 as compared to year 2014 (Taing, 2014). This can be linked to the theory we have learned where the consumer will tend to reduce the consumption for the increase in tax burden. The drop in consumption will lead to lower GDP which indicates a slower economic growth (Taing,
Sales tax is income elastic; because of this fact, consumers have a higher tax incidence and carry the burden. From this, it has been evidenced that the tax burden is vertically unequitable and can be seen as unfair to the less fortunate. Sales tax is paid by retailers, which is dependent upon their sales revenue. However, since the demand of consumers is inelastic and can vary based on market and economic conditions, this burden is felt more by lower income individuals and families. However, it is important to note that the tax burden is independent of who physically pays the tax.
Although this may be true for some families, the majority will not be willing to pay the extra tax. even if they can afford it. The tax will also serve as a constant reminder to customers as to why this may not be the best option for themselves or their
Thus, the middle class is under quite pressure which is still likely to increase and the middle class would have not spent more money in other consuming, which is bad for cycle of
Fiscal Policy The advantage of tax is tax reduction. The current tax rate is 20%. This will impact Next because when they claim a tax deduction, it will decrease the amount of income which is subject to tax.
Often, individuals with higher income have flexible regarding purchases considering that they have enough financial power to use on basic needs and to save. As a result, such individuals are expected to buy the company products in bulk or more frequently irrespective of the price of the products. On the other side, low-income earners are not expected to purchase the company products in bulk or frequently. Nevertheless, consumer income is widely affected by the rate of inflation which determines the amount of money they receive as salaries and wages as well as the prices of the company’s product. Inflation is widely defined as the continued increase in prices of products and consumers.
This stock market crash along with overproduction and decreased consumer
2014). This group of customers will have an even harder time buying luxury goods when they have to pay more tax. Due to their price sensitivity they will be likely to not buy the good anymore after an increase in price. An example to illustrate this situation can be a person buying a wedding ring once in his life or going on a relaxing holiday. While before the luxury tax he might have been able to go on a luxury holiday every 10 years, he might now decide to not go anymore at all.
National Health Insurance – The pros and cons Malaysia is a developing country. == = However, for the past 50 years since the independent day of Merdeka, the health care system of Malaysia is implemented and managed in a considerably well manner, as the government aware that the importance of health care is the fundamental part for a country’s development. There are four different methods of funding in Malaysian health care including (1) public general taxation; (2) social health insurance by Social Security Organisation (Socso) under Ministry of Health Resources; (3) voluntary private health insurance; and (4) government annual national budget allocation for public health expenditure.
Consumers can be from working and upper social class. Although in the book, the lower caste is conditioned to consume more of society. Evidence: “The idea was to make them want to be going out into the country and every available opportunity, and so compel them to consume transport” (22). Analysis: The author’s use of parallel, he wants the society “to be out going into the country” contradicts how he wants to “abolish the love if nature” (6). The use of punctuation makes it feel to the readers to be continuous and not much to pause.
Inflation is the rate at which the general level of prices for goods and services is rising, and, then purchasing power falling over a period of time. When price level rises, dollar buys fewer goods and services. Therefore, inflation results in loss of value of money.
The government must extend the length of “perhatian” in Malaysia to five year instead two
INTRODUCTION - Bubbles An economic bubble is a phenomenon where market activity is heightened because of high expectations of returns, and optimism about potential returns due to technological advancement or discovery or due to anticipation of wealth creation because of disruption caused by innovative technology and/or the emergence of new markets. In an economic bubble, the public has high expectations of growth and returns on investments, which leads to excessive investor interest and participation. Since this investment increases the perceived values of companies, it induces more people to invest, and as such, financing activity in the sector increases to an unrealistic level, thus creating a so-called “bubble”. Due to the lack of understanding
During times of prosperity, consumers with higher income are willing to buy apple products. However, during a recession period, consumers with lower income are no willing to buy goods and services because of higher rates of unemployment and
CHAPTER 2 LITERATURE REVIEW INFLATION (InvestorWords, 2015) stated that inflation is the increase in the general price level of goods and services in economy, normally caused by excess supply of money. Inflation usually measured by the Consumer Price Index (CPI). When the cost of producing goods and services goes up, the purchasing power of dollar will decrease. A customer will not be able to purchase the same goods and services as he/she previously could.
Also butter is considered to have high source of fat, health conscious people may reduce the consumption which could affect its sales. PEST Analysis Political:Since the budget range is decontrolled, no political effects are envisaged. Economic: • The Increasing per capita income of the whole population is resulting a higher disposable income to the consumer as the purchasing power parity is also rising