ipl-logo

Effects Of Inflation On The Economy

1628 Words7 Pages

Inflation is one of the most important economic issues in the world. It can be defined as the price of goods and services rising over monthly or yearly. Inflation leads to a decline in the value of money, it means that we cannot buy something at a price that same as before. This situation will increase our cost of living.
The Gross Domestic Product (GDP) is the total market value of a country’s output. The GDP is the market value of all final goods and services produced within a given period of time by factors of production that located in the country doesn’t matter they are citizens or foreign-owned companies. Hence, the gross domestic product is the best way to measure the country economy. It has four component such as personal consumption expenditures, gross private domestic investment, government consumption and gross investment and net exports.

Inflation
The first effect is the purchasing power reduce. When the price of goods rise speedily, consumers become more concern about future costs, prices of goods and services. When inflation rises but the salaries still remain, the purchasing power of consumers may decline, especially for retirees and fixed-income consumers. This is because they are unable to pay for more costs by the same income. They tend to spend less and reduce their standard of living.
Besides that, inflation also influences the business competitiveness. When a country has a high rate of inflation, it may cause the domestic products less

Show More
Related

  • How Do Pennies Affect The Economy

    144 Words  | 1 Pages

    Around the world, there are billions of pennies and every single one of them has basically the same format, shape, and size. The penny is usually the smallest denomination within our currency system. People around the world uses pennies to help buy things that humans would need to have in life. Without the existence of pennies, it would make our currency become worse and less organized also it could really drop our market economy or just the economy itself. In general, pennies doesn’t actually get dirty; the copper used for pennies is made up mainly of copper atoms.

    Read More

  • How Does The Federal Reserve Act Affect The Economy

    288 Words  | 2 Pages

    All the Acts have an impact on the economy; however, in my opinion, the Federal Reserve Act plays an important role than the other Acts. It is the oldest Act compared to the others without any other Act and effective. They set the federal discount rate; which enables control to the availability and stability of money and banks in good standing can borrow money at discounted rate. So the Federal Reserve is responsible for the money supply. During the recession, they can lower the interest rate to stimulate the economy, making it favorable for banks as well as individuals to borrow money.

    Read More

  • How Did Reaganomics Affect The American Economy

    1083 Words  | 5 Pages

    “If we ever forget that we are One Nation Under God, then we will be a nation gone under.” These are the famous words of one president who went above and beyond his presidential duties which helped sculpt America into the country it is today. America is the land of the free and the home of the brave, and this president kept this promise to his nation and his people. He helped relieve the countries involved in the Cold War, went head to head with another world superpower; the USSR in the advancement of technology and witnessing what is beyond our world, and created millions of new jobs for American citizens due to Reaganomics. greatly benefited the people of America and even people around the world during his presidency in a variety of different

    Read More

  • Great Depression Dbq

    1031 Words  | 5 Pages

    The GDP is manly used to measure the greatness of the economy. It tells the total dollar value of all goods and services produced over a specific time period. GDP is calculated by either the income approach or by the expenditure method. The income approach is calculated by adding up the total compensation to employees, gross profits for firms, and taxes, less any grant.

    Read More

  • Essay On How The Federal Reserve Hurt The Economy

    982 Words  | 4 Pages

    How the Federal Reserve Has Hurt the American Economy The Federal Reserve is one of the least understood but most influential American institutions. Its responsibilities include fighting unemployment, ensuring healthy wage growth, and protecting the value of the U.S. dollar. To put it very simply, the job of the Federal Reserve is to keep the economy running as smoothly and efficiently as possible.

    Read More

  • How Did The Recession Affect The Economy During The 1920's

    778 Words  | 4 Pages

    The economy during the 1920’s seemed to be one of great wealth and prosperity, but in the very beginning of the decade, people experienced superficial prosperity. This is when people seem like they have wealth, but it is an illusion. The economic situation at the turn of the decade was grim. The Economic Recession of 1920-1921 lasted for about 18 months. The cause of the recession is widely believed to be a mixture of high federal debt after the war, labor unions rebelling, inflation rates jumping 20%, and a too tight economy (Murphy).

    Read More

  • How Did The New Deal Affect The Economy

    513 Words  | 3 Pages

    The New Deal did not attempt truly radical solutions to the problems of the American economy in the 1930s. Neither did it end the nation's suffering. It did, however, lead to some profound and lasting changes in American politics and social life. The New Deal did not put an end to the Great Depression.

    Read More

  • How Does The Federal Reserve Affect The Economy

    613 Words  | 3 Pages

    Inflation can be linked to several different reasons. Some main reasons for the cause of inflation are consumer confidence, decease in supplies, and corporate deciding to charge more. (Investopedia) Consumer confidence is when consumers gain more confidence in spending due to a low unemployment rate and wages being stable. As the consumers continue to be more confident in spending this will cause for a high demand of product and services. As the manufacturers and the companies that are providing services see that the demands are going up, eventually they will drive up the prices for the products and services.

    Read More

  • How Does The Minimum Wage Affect The Economy

    706 Words  | 3 Pages

    Raising the minimum wage will ruin our economy. Look at the big picture, businesses and companies will struggle or close, poverty will increase, and the price of consumer goods will rise. There are a few things that let economists know how the economy is doing at the moment. They’re called economic indicators, and 2 of them are consumer confidence and unemployment rate. The more people that are unemployed, the less money being used to buy things which hurts the economy.

    Read More

  • The Four Causes Of Inflation In Trinidad And Tobago

    1729 Words  | 7 Pages

    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.

    Read More

  • Classical And Classical Economics: The 1929 Economic Crisis

    1116 Words  | 5 Pages

    Prices are flexible, which provides the full employment balance. Increasing wages will lead demand for labor to fall, the falling demands will cause wages to decrease again and it will cause increasing

    Read More

  • Pestel Analysis Of Advertising

    1564 Words  | 7 Pages

    On the other hand, inflation rates have a negative effect on the growth of the advertising industry. Inflation rates affect the prices of goods and services which also affects the purchasing power. If the purchasing power of the consumers decline, manufacturing industries will experience low returns. They will shift the burden to the advertising industry by reducing investment in the industry and therefore affecting growth. The other economic factors also affect growth in one way or another (FME, 2013).

    Read More

  • Disadvantages Of Economic Growth

    1571 Words  | 7 Pages

    Along these lines, unemployment may decrease, as this has different favorable circumstances, for example, lower government using on profits and less social issues. However, this phenomenon includes a number of different expenses. Firstly, if economic growth is unsustainable and is higher than the long run pattern rate, inflations are liable to be seen. An increase in economic growth could prompt an equalization of issued installments. In case the expanded customer expenditure causes further development, there will be an increase in the import sector.

    Read More

  • Literature Review Of Inflation

    1055 Words  | 5 Pages

    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.

    Read More

  • Roles Of Money In Macroeconomics Essay

    1772 Words  | 8 Pages

    Also, the benefits of the public good are enjoyed by all. The producers are able to better plan their production and consumers know when to buy. Macroeconomic variables act as indicators of the current trends of the economy like inflation or recession and anticipate their future trends. Some of the indicators of macroeconomics are as follows: - Growth: Economic growth indicates the expansion of the economy over time and is measured by the performance of the economy over the same period in the immediate past. For eg, the performance in a particular quarter of the economy vis a vis the the same quarter in the previous year.

    Read More

More about Effects Of Inflation On The Economy

Open Document