Question

This is an APA or MLA style essay (3 pages minimum, not including your Title page) and must include the following sections:

·       Introduction (the Appendix has more info on how to write the Introduction)

·       Background Story (a basic overview and how your case study relates to the economic models and statistics we have studied in class)

·       Analysis (diagnosing or understanding the key points or challenges in the study)

·       Conclusion (what we can learn from your case study)

·       References

topic - Inflation: Causes and Consequences

this is an unorganized essay, help me revise the essay. You can add or correct the paragraph if there are any problems.

In this case study, I will be focusing on inflation, the cause, and consequence. What is inflation? A simple way to define Inflation is item price increase and the value of money decrease. Although increasing price of few items don’t seem much to some people, but what if the whole economy were affected by inflation? It decreases our ability to purchase items and save money, which also affects many other businesses. Over future inflation may discourage in investment and savings, and high inflation may lead to shortage good if consumers begin hoarding out of concern that prices will increase in the future. In this study, I have approached some of the major causes and the consequence of inflation, this helps me understand why the prices are continually moving up and how it will affect each individual and the whole economy.

               Inflation is the continued growth and general price of goods and services and productive factors in an economy over time. Our economic growth is measured by gross domestic product, or the total value of goods and services produced each year. As prices rise, the value to the currency decrease, consumer’s purchasing power will also decrease with each increase in the prices of goods and services. But to understand inflation, we must learn from the inflation that had once occur in the past. Those price increases that are persistent over time. “There are countries where inflation is controlled under 10% annual average inflation that others do not exceed 20% annually and countries in which price growth has exceeded 100% annually.” When the price variation reaches 50% a month, we call it hyperinflation.

               There are several countries had gone through hyperinflation in the past. Let’s take Hungary as an example. Between 1945 and 1946, Hungary went through the worst inflation in history, led by The Treaty of Trianon and political instability. Their currency’s value is dropping dramatically, and prices are constantly growing. The peasants decrease the power to purchase more items, and the government was unable to tax properly. Eventually, they start printing more money. Starting from 1944, the highest denomination in Hungary was 1,000 pengo (currency), by the end of 1945, it was 10,000,000 pengo. In the mid-1946, their denomination reached a record of 100,000,000,000,000,000,000 pengo (here or what can it purchase). The prices double every 15 hours, it was the most known inflation incident ever recorded in history, and we call it hyperinflation. (add ----- money exchange to us dollar.)

               So what are the causes of inflation? The two basic principles that cause inflation are cost-push inflation, when the cost of production rises, and when there is an increase in aggregate demand, but without increasing the aggregate supply. While there is numbers of causes of inflation, most inflation has caused by government, especially printing money when there is a treasury budget deficit. “According to Peter Bernholz analysed 29 hyperinflations and concludes that at least 25 of them have been caused in this way.” < printing money. Continue rapid increase in the amount of money that is not supported by a corresponding growth of goods and services or some sort of extreme negative supply shock, often associated with wars, or natural disasters can also be the cause of inflation. Lastly, the growth in the money supply can influence inflation. But the definition of its causes is not a simple matter because the general increase in prices often becomes a complex circular mechanism of which is not easy to determine the factors driving the price increase.

               Inflation increase the price for various types of goods and services, impact the cost for living, doing business, borrowing money, mortgages, corporate, and government bond, also other parts of the economy. Inflation can be beneficial if the government controlled at a steady increase, consumers have more money to buy goods and services, employment also increases, and the economy benefits and grow. However, if inflation increase too fast, it will damage the economy, and the results can be different as the inflation rate varies.

               The effects of inflation are to some extent as it can be expected or unexpected. Whatever form it takes inflation, entails costs and the higher the rate of price changes the higher the costs. There are costs of holding money so that operators spend more time discussing what to do with their money balances. The inflationary process involves, for dealers, real costs to update the prices. The steady increase in the general price level has redistributive effects in favor of debtors, in the distributive struggle employees and all those who depend on fixed nominal incomes will reduce their real income. Inflation also causes costs to the treasury due to the delay between the time of incurring the expenses and revenue collection.

               Inflation is a phenomenon closely linked to the economic policy of developed countries and institutions that control and regulate the global economy. It is clear that within the national economy and effectiveness capacity of successive governments to manage the economy through laws and decisions, is the key to the stability and welfare of the inhabitants. In the specific case of Peru, there is a great expectation in its economic recovery from the rational exploitation of the main productive sectors: Mining, fishing, and tourism.

               The government and business, a unified, should help to boost the production of industrial and commercial development. Providing more jobs and exports, will gradually improve the economy. One necessary step should be the regulation of imports, after investigation, to prevent excessive output current currency. All the world pays a greater or lesser degree have experienced inflationary processes. This economics produces social costs high, enough to demonstrate the importance of this issue. Other less precise definitions explain how the continued upward movement of the general price level or diminution the purchasing power of money. It should be noted that there is no complete and well-formed theory on formation prices, this is due in part to decisions on price fixation not rely solely on the verifiable observation variables, but Also do the behavior of individuals and the expectations or assumptions that each of these is made on demand.

Answer 1

Answer: Topic - Inflation: Causes and Consequences

Introduction

In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. In this case study, we will be focusing on inflation, the cause, and consequence. What is inflation? A simple way to define Inflation is the price increase and the value of money decrease. Although increasing price of few items don’t seem to bother much, but what if the whole economy were affected by inflation? It decreases our ability to purchase items and save money, which also affects many other businesses.

Also, in future inflation may discourage the investment and savings, and high inflation may lead to shortage of good if consumers begin hoarding out of concern that will increase the prices. In this study, we have approached some of the major causes and the consequence of inflation, that helps us understand why the prices are continually moving up and how it will affect each individual and the economy as a whole.

Inflation is the continued growth of general price of goods and services and productive factors in an economy over time. Our economic growth is measured by gross domestic product, or the total value of goods and services produced each year. As prices rise, the value to the currency decrease, consumer’s purchasing power will also decrease with each increase in the prices of goods and services. But to understand inflation, we must learn from the inflation that had once occur in the past. Those price increases that are persistent over time. “There are countries where inflation is controlled under 10% annual average inflation that others do not exceed 20% annually and countries in which price growth has exceeded 100% annually.” When the price variation reaches 50% a month, we call it hyperinflation.

Inflation affects economies in various positive and negative ways. The negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future. Positive effects include reducing the real burden of public and private debt, keeping nominal interest rates above zero so that central banks can adjust interest rates to stabilize the economy, and reducing unemployment due to nominal wage rigidity.

Background story

There were several countries who had gone through hyperinflation in the past. Let’s take Hungary as an example. Between 1945 and 1946, Hungary went through the worst inflation in history, led by The Treaty of Trianon and political instability. Their currency value was dropping dramatically, and prices were constantly growing. The peasants pirchasing power decreased drastically, and the government was unable to tax them properly. Eventually, they started printing more money. Starting from 1944, the highest denomination in Hungary was 1,000 pengo (currency), by the end of 1945, it was 10,000,000 pengo. In the mid-1946, their denomination reached a record of 100,000,000,000,000,000,000 pengo (here or what can it purchase). The prices double every 15 hours, it was the most known inflation incident ever recorded in history, and we call it hyperinflation. (add ----- money exchange to us dollar.

Also song Dynasty China introduced the practice of printing paper money to create fiat currency. During the Mongol Yuan Dynasty, the government spent a great deal of money fighting costly wars, and reacted by printing more money, leading to inflation. Fearing the inflation that plagued the Yuan dynasty, the Ming Dynasty initially rejected the use of paper money, and reverted to using copper coins.

So what are the causes of inflation? The two basic principles that cause inflation are cost-push inflation, when the cost of production rises, and when there is an increase in aggregate demand, but without increasing the aggregate supply. While there is numbers of causes of inflation, most inflation has caused by government, especially printing money when there is a treasury budget deficit. “According to Peter Bernholz analysed 29 hyperinflations and concludes that at least 25 of them have been caused in this way printing money. Continue rapid increase in the amount of money that is not supported by a corresponding growth of goods and services or some sort of extreme negative supply shock, often associated with wars, or natural disasters can also be the cause of inflation. Lastly, the growth in the money supply can influence inflation. But the definition of its causes is not a simple matter because the general increase in prices often becomes a complex circular mechanism of which is not easy to determine the factors driving the price increase.

So, the adoption of fiat currency by many countries, from the 18th century onwards, made much larger variations in the supply of money possible. Since then, huge increases in the supply of paper money have taken place in a number of countries, producing hyperinflations – episodes of extreme inflation rates much higher than those observed in earlier periods of commodity money. The hyperinflation in the Weimar Republic of Germany is a notable example. Currently, the hyperinflation in Venezuela is the highest in the world, with an annual inflation rate of around 536.2% as of October 2017.

Analysis

Inflation increase the price for various types of goods and services, impact the cost for living, doing business, borrowing money, mortgages, corporate, and government bond, also other parts of the economy. Inflation can be beneficial if the government controlled at a steady increase, consumers have more money to buy goods and services, employment also increases, and the economy benefits and grow. However, if inflation increase too fast, it will damage the economy, and the results can be different as the inflation rate varies.

               The effects of inflation are to some extent as it can be expected or unexpected. Whatever form it takes inflation, entails costs and the higher the rate of price changes the higher the costs. There are costs of holding money so that operators spend more time discussing what to do with their money balances. The inflationary process involves, for dealers, real costs to update the prices. The steady increase in the general price level has redistributive effects in favor of debtors, in the distributive struggle employees and all those who depend on fixed nominal incomes will reduce their real income. Inflation also causes costs to the treasury due to the delay between the time of incurring the expenses and revenue collection.

               Inflation is a phenomenon closely linked to the economic policy of developed countries and institutions that control and regulate the global economy. It is clear that within the national economy and effectiveness capacity of successive governments to manage the economy through laws and decisions, is the key to the stability and welfare of the inhabitants. In the specific case of Peru, there is a great expectation in its economic recovery from the rational exploitation of the main productive sectors: Mining, fishing, and tourism.

Conclusion

From above we have reached to the conclusion that the government and business, a unified team, should help to boost the production of industrial and commercial development. Providing more jobs and exports, will gradually improve the economy. One necessary step should be the regulation of imports, after investigation, to prevent excessive output current currency. All the world pays a greater or lesser degree have experienced inflationary processes. This economics that produces high social costs is enough to demonstrate the importance of this issue. Other less precise definitions explain how the continued upward movement of the general price level or diminution the purchasing power of money. It should be noted that there is no complete and well-formed theory on formation of prices, this is due in part to decisions on price fixation and not rely solely on the verifiable observation variables, but also on the behavior of individuals and the expectations or assumptions that each of these is made on demand.

The real purchasing power of fixed payments is eroded by inflation unless they are inflation-adjusted to keep their real values constant. In many countries, employment contracts, pension benefits, and government entitlements (such as social security) are tied to a cost-of-living index, typically to the consumer price index.^[72] A cost-of-living adjustment (COLA) adjusts salaries based on changes in a cost-of-living index. It does not control inflation, but rather seeks to mitigate the consequences of inflation for those on fixed incomes. Salaries are typically adjusted annually in low inflation economies. During hyperinflation they are adjusted more often.^[72] They may also be tied to a cost-of-living index that varies by geographic location if the employee moves.

Annual escalation clauses in employment contracts can specify retroactive or future percentage increases in worker pay which are not tied to any index. These negotiated increases in pay are colloquially referred to as cost-of-living adjustments ("COLAs") or cost-of-living increases because of their similarity to increases tied to externally determined indexes.

References

America statistics