The Effect Of Inflation, Interest Rate, And Gross Domestic Product On The Economic Growth Of India

Alongside the entrepreneur spirit, Innovation is the process of taking new ideas and implementing them into the market. Key word being “new”, an innovation can be sometimes viewed as the application to better solutions that meet new demand-requirements, inarticulated needs or existing market needs. Innovative ideas range from: goods, services, products, processes, services, technologies or ideas that create value for which customers will pay for. For an idea to be an innovation, it must be replicable at an economical cost and must satisfy a specific need. This means is that one must be ready and willing put their new idea to the test. On the other hand, there is recognition that “innovation is also critical to cultural, environmental, social, and artistic progress as well” (Bullinger, 2006). With this stated, high-tech innovation is ultimately the reason why we can be thankful for the many new conveniences of the 21st century. Although we might see the forefront of innovation being very prominent in today’s world, innovation is truly nothing new. From the start of modern man times, innovative ideas have paved the way for civilization to advance and develop into what we are today and at the same time, we have barely begin to chip away at the tip of the iceberg of our true human potential. Some scholars believe that innovation is a

Inflation hinders economic growth. For example, when inflation is high, goods and services cost more, and people tend to spend less. High inflation also causes less long-term planning associated with spending money, such as home building and investing. Businesses are affected in the same manner. When inflation goes up, and down inconsistently, people become weary of spending, exacerbating their fears that they won’t be able to pay their bills. Long-term interests also go up, due to high inflation. The cost added to long-term interest rates compensates for the risk associated with inflation. Additional costs on interest rates make people less willing to take on a loan. When, the demand for goods and services is low, then the supply of goods up, the production of those goods has to decrease, giving rise to

1). In 2016, the inflation rate was at 2.07 percent, and as of February 2017 the rate is about .90 percent (“Inflation Rate,” n.d.). As we can see, the economy has bounced back from its position during the recession. GDP has increased drastically since 2009, unemployment has decreased past its position from 2007, the interest rate has risen, and inflation has also gone up which indicates a strong and healthy economy. Although a higher interest rate is unfavorable for consumers and businesses, it means that the government is confident that the economy will continue to improve. This also means that consumers have enough disposable income to spend on whatever they wish, so the government does not need to lower the rate in order to encourage borrowing and spending. These metrics indicate that the economy has recovered from the Great Recession, and is continuing to improve.

In the United States, there is the growing macroeconomic issue over the rate of economic growth. This issue consists of the potential regression of the United States, Gross Domestic Product, commonly known as GDP. GDP can be defined as the market value consisting of all the goods and services that are produced in a country that falls within the given time period, usually marked as a fiscal year. In terms of economic growth, GDP will always have a direct correlation to growth within a country. An increase in GDP will lead to an increase in the economic growth rate, and contrastingly, a decrease in GDP leads to significant decrease in economic growth rate, also known as a recession. This current macroeconomic issue is presented due to the fact that the United States is poised for a year that is associated with an economic growth rate between 0% and 1%.

Yellen will raise interest faster because of the higher inflation in future U.S. During some of Trump’s current recovery in growth, but causes development hard to reverse. The first cause is the past decades adult workers had increased, women from the “Baby Boom Generation” were working in the work force too. Therefore, today the president lessens immigration economist into the U.S.’s work force, and this would slow down the GDP. The second cause slowing economic growth and declining productivity growth of U.S., also for many advance countries. Mr. Jones and three co-authors research that American had increased twenty fold since the 1930s; hence, no dramatic changes had occurred in U.S. Before Trump promote his plans on regulatory and tax reform, he should be cautious of the outcome.

From 2003-2004 to 2006-2007, annual Real Growth Rate increases from 8.4% to 9.7%. Because of the summer’s credit-market crisis, the Indian GDP Growth decrease to 9.0% from 2007 to 2008 and Indian government estimates GDP Growth for 2008-2009 is 7.1%. The decrease of GDP ascribes the global financial crisis which affects India primarily through trade and capital outflows (The World Bank, 2008:16). On trade, exports are possible to weaken and make its contribution to GDP growth may be drop sharply. However, during

II) Since there will be an increase in the inflation rate, interest rates too will be high. This is because higher interest rates will be charged for loans and credits to compensate lenders for the declining value of money. Higher interest rates will also mean the spending and Investment will fall which might be crippling to the economy

While increasing the money supply is a good sign for the GDP, it is not the same for inflation. With the increase, the nominal value of money stays the same, but the increase in money continues to chase the same quantity of goods and services…thus the real value of money is decreased. The result is prices go up.

Innovation is normally used to denote the process that takes place when a product or a process is developed, from idea to market; the concept of invention only denotes the process that takes place when new ideas or solutions are generated. Baumol (2002) argues “is it possible to have lots of inventions and still lack innovations. Nevertheless, inventions are a necessary precondition for innovation”.

As the employment rate is improving, so would be the GDP for the U.S. A year ago, the GDP was 16661.0 billion, a month ago, it was 17311.3 billion and this week the GDP reported 17328.2 billion, which indicates that the economy is improving. There is a total increase in the Gross Domestic Product of 667.2 billion this year (Bostjancic, K. (2104). The GDP is being closely monitored by the Federal Reserve Bank (Fed) to determine if the economy is growing too quickly or too slowly. If it is determined that the economy is growing too quickly, to avoid inflation the Fed will increase interest rates. Likewise, if it is growing too slowly then interest rates will decrease to increase consumers spending and expand company investment.

To begin relating the article to the information taught in class I will analyze the formulas attributing to GDP and forecast what may occur due to increased interest rate based on basic macroeconomic methods. The equation for GDP is Y=C+I+G+NX, G is

| THE IMPACT OF INFLATION RATE AND INTEREST RATE ON REAL GROSS DOMESTIC PRODUCT OF INDIA

Innovation is the creation of better or more effective products, processes, services, technologies, or ideas that are accepted by markets, governments, and society. Innovation differs from invention in that innovation refers to the use of a new idea or method, whereas invention refers more directly to the creation of the idea or method itself. Innovation and HRM

Three ultimate macroeconomic goals which every government strives to achieve in order to ensure sound macroeconomic policy are maintenance of relative stability in domestic prices, attainment of a high rate of employment or full employment and achievement of a high rapid and sustainable economic growth. The relationship between inflation and unemployment on growth remains a controversial one in both theory and empirical findings. Originating from the Latin American context in the 1950s, the issue has generated an enduring debate between structuralists and monetarists. The structuralists believe that inflation is essential for economic growth, whereas the monetarists see inflation as detrimental to economic progress. There are two aspects to this debate:

The inflation rate informs us about the purchasing power of our currency; in other words, the higher it is, the weaker our currency becomes and the worse our economy becomes. However, at a moderate amount, it can actually stimulate the economy. In this case, the inflation rate is based on the consumer price index, which means we need the ending price index for 2014 and the beginning price index for 2004 in order to find the inflation rate over the 10-year period. As reported by World Bank, the consumer price index for 2014 was 108.6 and the consumer price index for 2004 was 86.6. Thus, the inflation rate over the past 10 years is 2.3%. This means we are a little over the Federal Reserve’s goal of 2.0% inflation, but with the right actions, the Federal Reserve could soon reach their goal.