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Inflation
A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.
1,474 Questions
How much would one dollar in 1949 be worth today?
One dollar in 1940 was worth about $15.58 in 2010 dollars.
What best describes a period of inflation?
Characteristics of inflation are:
Inflation involves a process of the persistent rise in prices. It involves rising trend in price level.
Inflation is a state of disequilibrium.
Inflation is scarcity oriented.
Inflation is dynamic in nature.
Inflationary price rise is persistent and irreversible.
Inflation is caused by excess demand in relation to supply of all types of goods and services.
Inflation is a purely monetary phenomenon.
Inflation is a post full employment phenomenon.
Inflation is a long-term process
What are some major factors that have been responsible for inflation?
Demand side factors:
1- Increase in nominal money supply: Increase in nominal money supply without corresponding increase in output increases the aggregate demand. The higher the money supply the higher will be the inflation.
2- Increase in disposable income: When the disposable income of the people increases, their demand for goods and services also increases.
3- Expansion of Credit: When there's expansion in credit beyond the safe limits, it creates increase in money supply, which causes the increased demand for goods and services in the economy. This phenomenon is also known as 'credit-induced inflation'.
4- Deficit Financing Policy: Deficit financing raises aggregate demand in relation to the aggregate supply. This phenomenon is known as 'deficit financing-induced inflation'.
5- Black money spending: People having black money spend money lavishly, which increases the demand un-necessarily, while supply remains unchanged and prices go up.
6- Repayment of Public Debts: When government repays the internal debts it increases the money supply which pushes the aggregate demand.
7- Expansion of the Private Sector: Private sector comes with huge capitals and creates employment opportunities, resulting in increased income which furthers the increase in demand for goods and services.
8- Increasing Public Expenditures: Non developmental expenditures of government lead to raise aggregate demand which results as increased demand for factors of production and then increased prices.
9-Credit purchase-Due to increase in credit cards people can puchase in credit which in result increase demand
10-Speculation-Speculation is also increase demand especially gold and shares
Supply side factors
1- Shortage of factors of production or inputs: Shortage of factors of production, i.e. raw material, labour capital etc causes the reduced production, which causes the increase in prices.
2- Industrial Disputes: When industrial disputes come to happen, i.e. trade unions resort strikes or employers decide lock outs etc the industrial production reduces. And as a short supply of goods in the market the prices go up.
3- Natural Calamities: Natural disasters, invasions, diseases etc effect the agricultural production, and shortage of supply which furthers the rise in prices.
4- Artificial Scarcities: Hoarders, black marketers and speculators etc create artificial shortage to earn more profits by keeping the prices high. (in Pakistan bird flu dilemma and sugar crises are the major examples in this regard)
5- Increase in exports (excess exports): When the country has tends to earn maximum foreign exchange and exports more and more without considering the domestic use of the commodities, it creates a shortage of commodities at home which increases the prices. (With reference to Pakistan, the failure of export bonus scheme during 1950's is the most common example of this type of cause of inflation)
6- Global factors: This factor includes the changing global environment. Most common example is the rise in oil prices. This factor of inflation may vary in nature, i.e. it can be political, strategic, economic or logistic in nature.
7- Neglecting the production of consumer goods: When the production of consumer goods is neglected with reference to the increased production of luxuries, it also creates inflation. For example in Pakistan, in last couple of years our services sector has grown with the highest rate of 8.8% (mainly telecom sector), while basic necessities have been ignored which created increase in the prices of consumer goods.
8- Application of law of diminishing returns: this law applies when the industries use old machines and methods and, which increase in cost by increasing the scale of production. This furthers the increase in prices and hence inflation bursts out.
9-Iefficient supply chain - Due to iefficient supply chain supply affects and cause demand on other side
How demand-pull inflation leads to an upward trend in prices?
Demand-pull inflation will tend to result in less demand for a product. This tactic is used when too many dollars are going after products with too little supply.
What is the value of a 1918 silver dollar?
You need to supply much more information - mint mark, condition, and most importantly why you think it's mis-struck. If you're referring to the spelling of the word TRUST in the motto In God We Trust, that is not a mistake. There are several other threads on this site explaining the use of the Roman alphabet on coins of the 1920s. It only had 24 letters, and what we write as U and J were replaced by V and I respectively.
In the keynesian model of aggregate expenditure real GDP is determined by what?
The aggregate expenditure model relates aggregate expenditures, which is the sum of planned level of consumption + investment + government purchases + net exports at a given price level, to the level of GDP. The key word here is planned.
GDP is the same as aggregate expenditures(AE) except for one difference.
People, firms and governments don't always spend what they had planned.
So AE differs from GDP in that it deals exclusively with amounts firms intend to invest, and not necessarily taking into account amounts that will actually be invested as in GDP
Where GDP is defined as C + I + G + NX and I = Ip + Iu
(planned + unplanned investment), Aggregate Expenditures is defined as
C + Ip + G + NX.
AE (Aggregate Expenditure) is used in conjunction with GDP in the Aggregate Expenditures Model to predict future GDP direction. In this model, when AE = GDP then the economy is in equilibrium. According to this model an economy will move towards its equilibrium causing changes in the GDP.
The current rate of inflation in Australia?
Well according to the 2007 estimates (not sure who made these estimates) the Australian rate of inflation is 3%. The official CPI (Consumer Price Index) issued Quarterly from the 'Australian Bureau of Statistics' (http://abs.gov.au ) for the actual inflation rate is:-
-Dec 2004 - Dec 2005 = 2.8%
-Dec 2005 - Dec 2006 = 3.3%
-Dec 2006 - Dec 2007 = 3.0%
-Dec 2007 - Mar 2008 = 1.3%
-Mar 2008 - Jun 2008 = 1.5%
-Jun 2008 - Sept 2008 = 1.2%
= 4.0% (so far in 2008 - incomplete)
Please check your coin again. It's either not 1941 or not Ben Franklin. Half dollars dated 1916 to 1947 carry the Walking Liberty design. Franklin's picture was on the half dollar from 1948 to 1963.
How did cosmic inflation resolve the flatness problem?
The cosmic inflation did resolve the flatness problem by the theory which states that the universe appears to have a flat geometry.
According to the demand-pull theory of inflation what is responsible for inflation?
producers raise prices to meet increased costs
When goods or services in general cost less in the deflated currency than previously.
What effects does inflation have on the purchasing power of the dollar?
If inflation occurs, the value of the dollar will decrease. This is because the amount of goods that the dollar can buy now becomes less.
Inflation is measured by the Bureau of Labor Statistics. They take a "basket" of goods and record the prices of each of the goods. The basket contains items such as food and clothes that all consumers would purchase. This is then transformed in the Consumer Price Index (CPI). This is how you are able to see how much a dollar is worth compared to other years.
How do monetary policy control inflation?
Monetary policy can have an impact of inflation. The ideal state of the economy is a balance between inflation and unemployment at 4.3% which is only seen in a wartime economy.
What are three causes of inflation?
Producers raise prices to meet increased costs, which causes costs to consumers to rise.
What types of inflation in Malaysia?
Types of Inflation
There are five main types of inflation. The various types of inflation are:
Wage Inflation
Wage inflation is also called as demand-pull or excess demand inflation. This type of inflation occurs when total demand for goods and services in an economy exceeds the supply of the same. When the supply is less, the prices of these goods and services would rise, leading to a situation called as demand-pull inflation. This type of inflation affects the market economy adversely during the wartime.
Cost-push Inflation
As the name suggests, if there is increase in the cost of production of goods and services, there is likely to be a forceful increase in the prices of finished goods and services. For instance, a rise in the wages of laborers would raise the unit costs of production and this would lead to rise in prices for the related end product. This type of inflation may or may not occur in conjunction with demand-pull inflation.
Pricing Power Inflation
Pricing power inflation is more often called as administered price inflation. This type of inflation occurs when the business houses and industries decide to increase the price of their respective goods and services to increase their profit margins. A point noteworthy is pricing power inflation does not occur at the time of financial crises and economic depression, or when there is a downturn in the economy. This type of inflation is also called as oligopolistic inflation because oligopolies have the power of pricing their goods and services.
Sectoral Inflation
The sectoral inflation takes place when there is an increase in the price of the goods and services produced by a certain sector of industries. For instance, an increase in the cost of crude oil would directly affect all the other sectors, which are directly related to the oil industry. Thus, the ever-increasing price of fuel has become an important issue related to the economy all over the world. Take the example of aviation industry. When the price of oil increases, the ticket fares would also go up. This would lead to a widespread inflation throughout the economy, even though it had originated in one basic sector. If this situation occurs when there is a recession in the economy, there would be layoffs and it would adversely affect the work force and the economy in turn.
Hyperinflation
Hyperinflation is also known as runaway inflation or galloping inflation. This can usually lead to the complete breakdown of a country’s monetary system. However, this type of inflation is short-lived.
Any types of inflation can affect the economy of the country. Higher inflation will result in lower purchasing power of the citizen, higher cost of living, lower quality of life and also the overall country economic activities as well. The citizen will feel dissatisfaction to the high inflation and the worst is maybe will cause negative impact to the current government of that country.
Most economists believe and agree that high inflation rate or hyperinflation is due to the excessive growth of the money supply of the country. The long sustained period of inflation is because of the money supply is growing faster than the economic growth of the country.
Inflation robs you of you savings. Inflation also causes you to pay taxes on land you sell. You have to charge more dollars just to get the same value back for your land. Then you are hit for an income tax on those cheaper dollars that you get. Inflation is like a hidden tax. It is the way that the government rips you off.
One more thing. Inflation creeps you up into a higher tax bracket. It may even trigger the ATM. To get a good perspective on inflation you may want to read the book, The Biggest Con.
Why is inflation especially difficult for retired people?
Inflation is that increasing prices of goods and services, but the salaries of retired people do not rise as the prices. They have fixed incomes, and therefore their money buys a little less each month.
What is the value of a 1887 silver dollar?
Assuming the coin is circulated and has no mintmark, the 1887 Morgan dollar is common. The retail values are $32.00-$38.00 depending on condition. Values are a market average and only for coins in collectible condition, coins that are bent, corroded, scratched, used as jewelery or have been cleaned have far less value if any to a collector or dealer
What is the Practical application of law of demand and supply in economics?
The law of demand denotes that a drop in the rate of a commodity hikes the volume demanded. The price elasticity of demand measures the volume demanded responds to a variation in price. Demand for a commodity is said to be elastic if the volume demanded reacts considerably to variations in price.
Demand is said to be inelastic if the volume demanded reacts only slightly to variations in the price. The price elasticity of demand for any commodity measures how enthusiastic consumers are to shift from the commodity as its price hikes. Therefore, the elasticity reproduces the many economic, social and psychological forces that shape consumer tastes. Depending on familiarity, nevertheless we can denote common rules about what ascertains the price elasticity of demand.
How did inflation make the economic situation in post-WW1 Germany worse?
In the era following World War I, Germany suffered from severe economic inflation due to several factors. First, its economy had been weakened by the war-effort. Second, it could not achieve stability in its political administration, thus no consistent (or successful) economic policies could be effected. Third, it was saddled with heavy reparation-payments to the victors of the war, mainly Great Britain and France.
expenditure approach is compute by GDP by adding the money spent by buyers on final goods and services.
what are final goods?what are intermediate goods?whats the difference? Expenditure means that the money which is earned for the stur-ups for the business or any investigations for the business to support with any equipment s or for example stuff trainings. In economics, business, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost…
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What is the different between inflation and unemployment?
The number of people unemployed is the number of people in the country who are out of work and who are available for work at current market wage rates. This can easily be changed to a percentage by relating the number of people unemployed, to the total number of people in the labour force.
Inflation is the general increase in prices over a 12 month period. This is measured by taking weighted averages of all consumer products (weighted on the frquency of purchase) and analysing the trend of overall prices. This is often called the Consumer Price Index (CPI) or Harmonised Index of Consumer Prices (HICP). This shows how much, as a percentage, the general price levels of all consumer goods have changed over the year.
The two have been analysed together using the Phillips curve which shows the rate of inflation plotted against the rate of unemployment.
Some other key terms you might find useful (try these in wikipedia maybe): Phillips Curve, Keynesian economics.
Hope this helps
