Evaluation of inflation: Inflation is the maintained and recurred rise in the general price level or the continued change in the currency value of a specific country. According to Frisch, “inflation is a process of continuously rising prices, or equivalently, of continuously falling value of money” (pp 9-19). Inflation is a very harmful part of economics to the economy as it may bring long term effects as well as short term effects to an economy. According to economists, inflation is one of the factors why some countries lag behind in terms of development level. However, inflation is a necessary evil for the growth of any economy (Young, 1).
Inflation is a rate at which general price level increases for goods and services produced in a nation. When inflation exists, the purchasing power of a nations currency declines over time. Inflation not only reduces the level of business investment, but also the efficiency with which productive factors are put to use. The benefits of lowering inflation are great, according to the author Dornbusch, but also dependents on the rate of
The effect of one leads to the cause of another. This could be explained as when the rate of inflation increase in a country, it results in the increase in prices of goods which further makes the goods of that country less competitive in contrast to other countries. As a result of which the demand of exports of that country falls due to which, the demand for the country’s currency also declines. And finally it ends up with depreciating the value of Currency. On the contrary, if a country’s currency depreciates then it leaves an impact on the imports of the country, making it more expensive.
It focuses on the aggregate behavior of consumers and firms, the behavior of governments, the overall level of economic activity in individual countries, the economic interactions among nations, and the effects of fiscal and monetary policy.” One measure of economic activity is gross domestic product (GDP), the quantity of goods and services produced within a country during a specific period of time. The figure below displays an example of GDP per capita in the United States during the years 1900-2011. Besides relying on GDP to understand the quantity of goods and service, macroeconomists also rely on models. In this case, the models are used to explain long-run economic growth, the purpose for business cycles, and the role economic policy should play in the macro economy. They are not always accurate explanations of the outcome or growth.
Inflation What is inflation? Inflation is defined as a continuous increase in the price level of goods and services along with a decrease in the purchasing power of the money. It is measured as an annual percentage increase with respect to a standard. Causes of inflation: There are many causes of inflation; some of them are as follows: 1. Demand Pull Inflation: This sort of inflation occurs when aggregate demand is more than the aggregate supply leading to decrease in unemployment (as per the Phillips curve).
INTRODUCTION Economic growth is defined as the increased capacity of an economy to be able to produce goods and services in comparison from one period of time to another. This is figured by the genuine Gross Domestic Product (GDP) and development, and is measured by utilizing genuine terms such as “Balanced Inflation”. These terms help to remove any distorted views on the perceived outcome of inflation on the cost of merchandises produced. Likewise, Economic growth is related to the high expectations in a person’s standard of living. If the standards are high, it wouldn’t be beneficial for the economy as the working class individuals will face a lot of trouble.
Inflation Inflation is referred to as a increase sustained in the general level of prices of goods and services in an economy over some specific period of time. As the price level rises, buying power of single unit of currency decreases. Thus, inflation rate is an indicator of reduction in the purchasing power per unit of currency. It is generally believed that high rates of inflation and hyperinflation are outcomes of excessive growth of the money supply. However, growth of money supply does not necessarily results in inflation.
GROSS DOMESTIC PRODUCT “The gross domestic product of a country is a measure of all of the finished goods and services that a country generated during a given period. GDP gives best measure of health of country’s economy. It is the number calculated by consolidation of total expenses of government, money spent by business, private consumption and exports of the country. Increment in GDP indicates economic growth. Foreign investors get attracted towards the countries with economically strong countries with good GDP.
And also the main reason of fluctuation and hurdles in economic development because of interest rate of money. And also creates unequal of distribution of wealth within the society as power of money in few hands. (Farooq 2012). Interest rate affects all sectors of all economy It has a major impact on banking sector because many countries have directly deal with money. The globalization is increasing so it has made efficiency as the most important factor of both financial and non-financial institutions and banking sector as the life of blood the modern trade of commerce.