Essay on Inflation

Higher Wages and Higher Prices Inflation involves changes in both prices and wages, and can be initially caused by either. Therefore, in this essay I will look at two cases of inflation, one, which is caused by a change in aggregate demand, and one, which is caused by a change in aggregate supply. Both of these will have relation to prices and wages. I will then examine the fiscal and monetary policy responses available to government in either case. In the

Monetary policy is the set of means implemented by a central bank to influence the economy by regulating its currency. Therefore, in every country, central banks play a key role in the economy of the country and implement a monetary policy. In the US, the Fed develops and implements monetary policies through certain indicators that will be discussed all through this paper focusing on the time period of 1997 to 1999. Those indicators are: economic growth as measured by real GDP, price level, interest

There are numerous variables or characteristics employed to estimate the health or strength of an economy, known as macroeconomic variables. This can include the following: The Inflation Rate It is referred to as the constant rate of change in the price level in the economy. Many economies encounter positive rates of inflation yearly (Sommers, 2005). Mostly, the price level is usually measured by a price index, which evaluates the price level of goods and services at a particular point in time. Again

besides inflation, income growth is also the function of equity returns (pp.1-2). According to Mishkin (2012), Fisher effect will only appear in samples when inflation and interest rates have trends (p.196). Numerous studies have found that a negative relationship exists between inflation and real stock return without explanation about the relationship, that is known as “a stock return – inflation puzzle” (Ghafoor et al. 2014, p.149). The relationship between stock prices and inflation still interesting

together, some economists have estimated that the cost to taxpayers of each unemployed person is up to £9,000 a year. Price Stability Some would say that the main reason why the control of inflation is so important is that if inflation gets out of control, the economy stops growing. If inflation rises, the Monetary Policy Committee (MPC) is forced to raise interest rates. Consumers will stop borrowing to spend and firms will stop borrowing to invest. The housing market will slump, and along

There are many factors that play a role in the development of a corporation. One being its initial raise of funds. Weather it’s through investors, lenders, stocks or bonds corporations must somehow find a way to increase their revenue. A firm that raises capital through lenders or investors must first convince potential investors of its profitability. They do this by releasing valuable information about their finances through a series of lengthy financial statements. Due to the Securities & Exchange

services rises, the inflation rate rises. I somehow disagree with this statement as it might be the secondary reason or not the only reason for the rise. But the factors that cause the inflation rate to rise are as follows: a) An icrease in demand for goods relative to supply: When there are many potential buyers of certain goods but the supply can not match the increased demand hence, results in Demand-pull inflation. Demand-pull inflation doesn’t result in inrease in rate of Inflation every time.

independent variables. My dependent variable is inflation. The inflation data used in this paper comes from EuroStat. Inflation is calculated as the annual average rate of change (%) in the Harmonized Indices of Consumer Prices (HICP). The HICP is a consumer price index which has been harmonized across EU countries, in order to avoid differences in how the price index is calculated. Inflation varies greatly across countries and the lowest inflation in this data set is -1.7%, while the highest is

Karnik (2000) reported weak causality running from IIP to share price index (Sensex and Nifty) but not the other way round and it held the view that the state of economy affects stock prices. Fama and Gibbon (1982) examined the relationship between inflation, real returns and capital investment and supported Mundell (1963) and Tobin (1965) findings that expected real returns on bills and

economy had developed early in the decade which hurt many of the farmers who prior to the deflation of the twenties used the lack of markets and inflation to make large profits. Profits led farmers to take on debt to buy more land and new equipment, however debt burden with deflation meant that they were in effect, paying more than if there was inflation as the dollar amount does not change, but the value of the dollar increases. The difference between debt and debt burden is that debt is something