Inflation And Its Effect On The Economy

1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?).

Inflation is the sustained increase in the general level of prices for goods and services in a county, and is measured as an annual percentage change. (Investopedia) During periods of inflation, the prices of products and services will rise. There are several reasons why an economy would see a rise in inflation. Decrease in supplies, corporate deciding to charge more, and consumer confidence are some of the reasons why an economy would see the inflation rate increase. Consumer confidence is when consumers gain more confidence in spending due to a low unemployment rate and wages being stable. Decrease in supplies is when consumers are willing to pay more for a product or service is that is slowly becoming unavailable due to a decrease in supplies. Corporate decisions are when the corporations basically decide

Introduction: Venezuela is a country in South America that occupies the northern coast. It has a population of 30.4 million people according to a 2013 survey. The entire country of Venezuela is about a third larger than Texas. Venezuela shares its border with Columbia to the west, Guyana to the east, and Brazil to the south. The GDP per capita in 2013 was $14,414 US putting Greece on the middle tier on the Global Economic Pyramid. Venezuela’s 2013 inflation rate was also 56.2%. Venezuela has the “largest proven reserves of crude oil in the world” and is currently dominated by the oil industry.

Venezuela is one of the top ten producers of oil in the world and has become dependent on the country's primary export product. Although Venezuela possesses a lot of power due to its oil production for the international market, the Venezuelan economy is drastically affected by the world market's demand and price. A common theme in Venezuelan economic development has been the call to “sow the petroleum,” meaning to use the revenues and comparative advantages that petroleum brings to support government programs and other sectors of the economy. Since oil became the nation's number one export in 1925, until international petroleum prices plummeted in 1986 (a period during most of which Venezuela was the world's leading exporter), the nation was blessed by nearly steady economic growth (Ellner 7). Any decline in global commodity prices, as in the 1990s, places the government under stress

Venezuela is a small country in the north part of the south American continent, between Colombia and both, the Caribbean and pacific oceans. Venezuela is widely known for its role in the oil sector, being one of the countries with the biggest reserve of fossil fuels in the east hemisphere. This reserves are easy to obtain, just by drilling. However, Venezuela is also known for the undergoing political crisis that stuck the economic growth; in the both the private sector and public. This crisis has lent the country to downfall in the economic, social and political sector. As a result of this decline of the economy, a big part of the populations has a big disapproval towards the policies that the “Rojos” (current government) has taken in the

“From 1999-2003, the government did not control the state oil company; in fact, it was controlled by his opponents, who used it to try to overthrow the government, including the devastating oil strike of 2002–2003.  For that reason, a better measure of economic growth under the Chávez government would start after it got control over the state oil company, and therefore the economy.” (Kozameh, 2014) In 2003, Chavez gained control of Petroleos de Venezuela (PDVSA) after the strike. Because of this control, Chavez had direct control over oil revenue. As Chavez gained power, the transparency with PDVSA went away and the company neglected to produce numbers and statistics on production or sales. Funding through PDVSA for discreet outside social

Venezuela has a large task determining which adjustments the government must make to the economy given falling oil prices. The all-encompassing impact falling oil prices has had on Venezuela’s social and economic wellbeing is the result of its political environment, and governmental structure. The political environment of Venezuela gave way to the current socialist government. A socialist government whose economic policies heavily rely on oil revenues.

The country also its looking for those resources in different parts of Latin America such as Nicaragua, Brazil, Argentina and Uruguay. The president of Venezuela, Nicolas Maduro, instead of solving the problem of corruption and scarcity of resources, created by him and his government, ask these countries to provide the food that can be produced in his territory and repays them with the oil, the most important resource our country has to offer. Venezuela is heavily dependent on oil - 96% of its export revenues are reported to come from the

There needs to be more price control outside of the governments control to access money and loosen up the labor restrictions as multiple American and multinational firms are reducing their Venezuelan operations. High costs for oil production as well as poor cash flow have slowed investment in the petroleum sector, resulting in a decline in oil production (CIA, 2015). The fact that oil accounts for such a high percentage of Venezuela’s exports, oil prices can dramatically affect its revenue. According to Cárdenas (2014), “Venezuela will remain turbulent and volatile for the foreseeable future. Unable to reestablish Chávez’s unique bond with his base, Maduro’s only option will be more authoritarianism and more heavy-handed tactics. He intends to maintain his “offensive” amid deteriorating economic conditions” (p.

Venezuela's state-run oil company, PDVSA, tumbled months behind around shipments of fuel under oil-for-loan bargains for China and Russia. Those deferred shipments got political partners in a bad feeling. Now Venezuela is $55 billion dollars in credit for their missing shipments. Now they are giving new knowledge under PDVSA's operational disappointments and also their handicapping sway on the country's unravellings communist economy. In view, oil accounts is the main revenue to the Venezuela's economy. PDVSA's emergency extends to the citizens torment through triple-digit inflation and food shortages reminiscent of the winding down days of the Soviet Union. Those late cargoes to state-run Chinese and Russian organizations are more nearly 750 million, as stated by a Reuters examination of the PDVSA documents. In conclusion, at the end of January, PDVSA was late on about 10 million barrels of fuel.

The oil-rich Bolivarian Republic of Venezuela, located on the northern coast of South America, was for many decades considered among the wealthiest nations in the entire continent. While having the largest proven oil reserves in the world has often proved a tremendous boon for Venezuela, the very black gold that has been the cause of its success has also proven to repeatedly be its kryptonite. Over half of the nation’s Gross Domestic Product stems from petroleum exports – which equates to approximately 95% of total exports. It is really not too hard to imagine what drastic consequences shifts in global oil prices could have on the economy.

Adam Kott from New York University poses the question on whether oil dependency in Venezuela contributes to national instability. He begins by arguing on the economic perspective by stating “A country with a monoculture, such the case of Venezuela and oil, will experience considerable economic hardship when the price of commodity falls” (Kott, 70). He further amplifies his hypotheses through the utilization of empirical data in which demonstrates the decline in GDP growth from 2008 to 2009. Due to the boom of commodity, the price of exports had majorly increased and the price of imports had decreased and this is correlated to oil and its impact on the strength of the currency. Prices become too expensive which results in a lack of trade

Venezuela has the world’s largest oil reserves and by 1960, it became the wealthiest country in Latin America. Petróleos de Venezuela (PDVSA), the state owned company, was the key to economic and social development in Venezuela under president Hugo Chavez. His government was settled in an environment where the oil prices were rising and the economy was booming, so he was able fund social programs and practices that were popular to the poor masses. This wealthy and growing Venezuela made Chavez to be very popular and his regime very powerful. Oil revenue accounted for nearly 90% of exports, more than 50% of government revenue, and 35% of country’s GDP.

This sharp increase in the world oil prices and the volatile exchange rates are generally regarded as the factors of discouraging economic growth. Particularly, the very recent highs, recorded in the world oil market bring apprehension about possible slump in the economic growth in both developed and developing countries.

The year 2014 witnessed a dramatic decrease in the world market price of crude oil. Beginning in June 2014, the price per barrel (pb) steadily declined from $115pb to below $50pb at the start of 2015 (Bowler, 2015; US EIA, 2015; Voigt, Walls, McKemey, Bakogiannis, Williams, Morley, Warga, & Bronstein, 2015). Fluctuations in oil prices can considerably affect various aspects of both the world and individual country economies (Basnet, Vatsa, & Sharma, 2014).