scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 543
INFLATION Types of Inflation 1Demand Pull Demand Inflation Occurs when there is too much spending in the economy Sometimes described as too many dollars chasing too few goods When the amounts of money buyers of GS want to spend increases more rapidly than the supply of GS then prices will be bid or pulled upwards Demand Inflation is more likely to occur when the economy is close to full employment when pressure on resources allows their price to be bid upwards demand for them exceeds supply 2Cost Push Cost Inflation Occurs when increasing costs of production are passed on to consumers in the form of higher prices Causes for this include Increased Wages Higher import prices for raw materials Increased Govt taxes Rising Interest rates Cost increases push up the general price level as businesses pass on the increases to their customers Cost inflation can occur independently of the level of aggregate expenditure Usually it is impossible to identify a period of inflation as having been caused by demand pull or cost push factors Its more likely that a combination of the two has been at work Effects of inflation Inflation effects both the potential size of the economic cake output effects and the way in which the cake is distributed amongst the members if the community redistribution effects Persistent inflation tends to lower business confidence and the certainty of future decisions This can contribute to higher unemployment and to lower economic growth because firms are uncertain about future costs and their level of profit Inflation can affect an economys competitive position in relation to other nations -If Australian economy rises faster than in other countries Australian goods become less competitive on world markets -At the same time imports become cheaper than domestic products so import-competing industries will suffer Inflation also affects the nations economic output because it distorts the pattern of
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA