College Papers

Economics Assignment 3

Economics Assignment
3.0 inflation rate
Define what is inflation:
Inflation is an increase of price level of goods and services overtime.

Causes of inflation:
Inflation is caused by mainly 2 factors: Demand pull factors or cost pull inflation.

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*demand pull inflation occurs when prices of goods and services rises because of high demand. If demand of goods and services in an economy, the government will tend to increase tax on the products of which will lead to an increase of prices.

These are some causes of demand-pull factors:
a developing economy: people are paid quiet well paid compared to other under developed countries, so they will try to spend a lot on their money trying to buy more of what they need in this way demand of goods or services will increase which will lead to an increase in price too.

Government purchase: when the government decides to concentrate on the purchasing of medical instruments like scanners; surgery instruments more foreign doctors this will increase prices of those new purchase.

Creation of more money in an economy or making more notes: the presence of much money than goods available this will increase or will make the prices going up because there is more money than the availability of goods.

*cost-pull inflation: cost pull inflation is a situation where prices increase due to an increase of raw materials such as wood, land cost, machineries…etc. when these materials which they use to produce finished good increase in price finished goods are going to increase in price too.

One of the main causes of cost-pull inflation is natural disasters like earthquake; volcano these can cause a high cost-pull inflation. CITATION INV18 l 17417 (INVESTOPEDIA, 2018) *types of inflation:
There are 2 types of inflation:1. creeping inflation and 2. Hyper- inflation.

1 creeping inflation: a creeping inflation is a situation where the inflation of an economy rises or increases overtime
2Hyper inflation is when prices of goods and services rises rapidly in a month. Example: 1kg of rice might be at 5 RM in the morning then the price goes up to 10 RM in the evening.

Causes are:
* when a government decides to print more money than they are earning there will be presence of money in the pockets of citizens and this will cause the increase of prices of good and services. Since there is more money than goods; goods will increase the price anyhow at any time. CITATION the18 l 17417 (the balance, n.d.)*HOW TO MEASURE INFLATION;
Inflation rate can be measured using CPI (consumer price index).CPI is a way to measure changes in price of goods and services of the consumers.

CITATION FOC18 l 17417 (FOCUSECONOMICS, n.d.)-Based on the graph above, Mexico’s inflation was9.0% in 2000 later in 2016 after 16 years the inflation decreased up to 3.0%.however in 2015 there was less inflation than in 2016 the percentage of inflation of 2015 was 2.0%.

The united states of America inflation rate of 2008-2018 was:
Here in USA the inflation rate is 3.84% in 2008 then declined in 2018 to 2.7.

In conclusion, Mexico has the highest inflation more than the USA’s. CITATION CPI18 l 17417 (CPI Inflation Calculator, n.d.)

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