How inflation rate Might Affect Non-Financial Corporations, the Banks, etc high level of inflation is the most important risk factor for our economy. Management of Federal Reserve Banks of America claims that threat of strengthening of price pressure remains the most considerable danger for American economy. The risk that basic level of inflation will increase became the main threat from the side of macroeconomic policy. Lets examine how high inflation rates can influence the work of non-financial corporations, the banks and our economic decisions. The dynamics of inflation processes affects the work of all financial organizations. Inflation increases risks and expenses of transactions.
It also demands stable liquid assets at bank accounts. In its turn, it increases the demand for financial services and profitability of bank business. At the same time inflation is the result of influence of many factors bearing both financial and non-financial character. Financial policy of government also plays its role. High rate of inflation results in growth of effective tax rates, and, as a consequence, negatively affects bank activity. However, it is very difficult to explain exact influence of high inflation and financial and tax methods of regulating inflation on bank system. High rate of inflation has impact on cost of allocating resources and decreases the real size of bank assets. 15% inflation rate is often considered the critical point of inflation.
The Essay on Educational Inequality and Financial Supports of Higher Education in Uk
Educational Inequality and Financial Supports of Higher Education in UK 1 Introduction Education inequality can be divided into three situation—socio-economic inequality, gender inequality and ethic inequality (Hanhum, Buchmann, 2005). This essay is going to talk about educational inequality from the perspective of socio-economic inequality. First, it will analyze the problems and then give ...
When inflation approaches 15% level, decrease of size of bank system and stock market gradually slows down (Hellerstein, Winter 1997).
Further it starts to depend on instruments that grade fluctuations of inflation tempo. Besides, high level of inflation affects the banks less than the stock markets. Finally, in the upshot, correlation between the assets of bank sector and market capitalization increases with the growth of inflation rates. High level of inflation also increases demand for liquidity, for bank service of various transactions and creates conditions for growth of bank profitability. According to various analyses of factors, influencing profitability of banks, 10% inflation positively affects the profitability of bank activity.
Correlation of inflation rates with value added (correlation of sum of profit and overhead expenses to assets) is more than correlation of inflation with profitability of assets (Hall, 1982).
Financial policy and inflation rate are mutually dependent. High rate of inflation negatively influences economy and life of ordinary people. High rate of inflation mainly affects people with low and average income. The increase of wages cannot be considered solution to problem but contributed to further growth of inflation rates (Braumann, 2004).
The higher is inflation level, the lower quantity of people continues to keep their money in banks. No use to keep the money at bank accounts with deposit annual rate of 4-5% when inflation rate reaches 6% and higher.
High inflation decreases purchasing capacity of population. It also affects the satisfaction of several important needs: nutrition, economic decisions concerning purchasing new homes, medicine, etc. high inflation impacts different groups of population. Even moderate inflation results in serious reallocation of finances because it influences income distribution making a random redistribution of real income (The effects of inflation, 2003).young people with average level of income are less affected by high level of inflation. Elder people are more affected. Such situation is a paradox.
The Essay on The Reasons for the Rising Senior High School Dropout Rate
A senior high school dropout in my opinion is any student who failed to complete the full educational cycle which was designed for them. A senior high school dropout is simply anyone who did not complete the educational cycle designed for them. They stop schooling along the line for various reasons making them dropouts. They do not graduate since they didn’t finish the cycle. There are so many ...
The reason of it is quite simple. Young people usually have more debts than the elder group of population. Young people are more inclined to have various bank credits such as Mortgage credit, and many others. When inflation grows, the amount of credit actually decreases. At the same time, the wages of young people increase. The employers usually increase wages in order to compensate high inflation. On the other hand, elder rich people prefer to keep their savings in maximum reliable, and, therefore, securities, floaters and bonds, bringing little profit.
In result of this, inflation lessens their value. Bibliography Braumann, B. (2004).
High Inflation and Real Wages. IMF Staff Papers, International Monetary Fund, vol. 51(1), , 6. Hall, R.
e. ( 1982).
Inflation, Causes and Effects. University of Chicago Press, Chicago, , 15. Hellerstein, R. ( Winter 1997).
The Impact of Inflation. Regional Review, Vol. 7, No. 1 , 21. The effects of inflation. (2003, July 7).
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