Consequences of inflation
Inflation occurs when there is a sustained increase in the general level of prices and the purchasing power of money falls correspondingly. The government tries to control inflation as it is a major aim in their policies. For example, in the UK the government targets inflation at 2% per year and not zero inflation. Although hard to believe, inflation is actually beneficial for the economy overall and outweighs the costs. This happens only when the inflation rate is at low levels (approximately 2%-5 %.)
To begin with, a positive aspect of inflation is that a low rate increase in price levels allows greater flexibility in a growing economy and it also helps prices to adjust, especially the price of labour- wages. In addition, a low inflation rate could become an incentive to a business to invest as their prices & profits would increase. Furthermore, debtors gain in times of inflation, since the real value of their debts goes down. Moreover, home owners find that the value of their house rises in times of inflation and thus feel that they are wealthier. In addition, consumers find it more easy to plan their spending ahead of time since they can predict the prices in the next weeks and months, allowing them to save a fixed amount of money every month and use it after some time to buy an expensive good, in the price they knew a long time ago.
The Essay on Increasing Crime Rate In India
With the rapid urbanization and development of big cities and towns, the graph of crimes is also on the increase. This phenomenal rise in offences and crime in cities is a matter of great concern and alarm to all of us. There are robberies, murders, rapes and what not. The frequent and repeated thefts, burglaries, robberies, murders, killings, rapes, shoplifting, pick pocketing, drug- abuse, ...
On the other hand, while some people get better off others become worse off at times of inflation. As a result the difference in income between various groups of the population may change. This is called income redistribution and the gap between rich and poor may change. In simple words, the rich will become richer while the poor, poorer. For example, people on fixed income suffer, because their real incomes fall if the income remains the same or does not rise with inflation. Another example is that debtors gain and creditors lose money during inflation. If someone borrows 100€ at a 5% interest and by the time he repays the inflation has risen over 5%, he will have gained in real terms. The person who lent the money will be worse off even if we include the interest he has received. This shows another cost of inflation which is that banks charge interest rates often higher than the rate of inflation. The creditors’ problem also applies for savers, who have deposited money in banks and other financial institutions. If the interest received is lower than the rate of inflation then the real value of their savings will fall.
Furthermore, another cost of inflation is that the loss of international price competiveness may cause balance of payment problems, or a current account deficit. Inflation encourages imports at the expense of exports and creates a deficit on the current account of the balance of payments. This is due to the fact that when there is inflation the exports of goods and services of a country seem more expensive and therefore their demand will lower. The imports, however, become relatively cheaper and more are likely to be imported, thus causing the current account deficit. Moreover, one of the most important costs is the fear of Unemployment. As the last point explained, when the firm of a country sells less abroad or domestically, less will be produced and some firms may even close down causing unemployment. Adding to that, inflation is a period of economic uncertainty, and business may be hesitant to invest in plant and machinery when the predictions of future profits and sales are uncertain. In addition, inflationary times cause pessimism in the business community and firms tend to delay their investment plans causing less goods and services to be produced which in the future will cause more unemployment. Furthermore, during inflationary times the real income of workers falls and the trade union leaders make demands on higher wages. Employers, however, who are currently facing other rising costs due to inflation and revenue fall find it difficult to offer higher wages. This causes anger and tension and may lead the workers into going on strikes, work to rule or overtime bans.
The Essay on Inflation and Government Economic Policies
... has helped to prevent inflation and hyperinflation. If the prices of goods increase while the income people are bringing in ... over 200,000,000,000 Marks. Inflation is measured in several ways including Consumer Price Index, Producer Price Index, Employment Cost Index, Gross ... the changes over time since January 2000 to January 2014 (Consumer Price Index – Chained Consumer Price Index, 2014). ...
Some other costs of inflation are the shoe leather cost and the menu cost. The shoe leather cost is the amount of time and effort a consumer spends by going in and out of shops in order to find the lowest possible price for the good or service he is looking for. Menu costs are the amount of cost a business has to spend in order to change their published prices, during inflation. By this I mean printing new price labels in restaurants, new leaflets of thousands of businesses, vending machines and parking meters need to be adjusted. Finally, the last cost of inflation is the danger of hyperinflation. At very high rates of inflation we can observe the phenomenon of hyperinflation where prices are rising very rapidly. A rate of inflation over 100% is a case of hyperinflation. The worst case in history of hyperinflation was in Yugoslavia during January 1994 where there was a hyperinflation of 313 billion %. At that point money becomes totally worthless and nobody will accept it as a method of payment causing people to return in some form of barter economy (where double coincidence off goods is needed.)
In my opinion, the costs of inflation outweigh the benefits since by the second we enter a time of inflation problems start to occur. Only some will benefit but most of us will have disadvantages. The fear of unemployment only causes many people to have nervous breakdowns and even the thought of hyperinflation causes stress to most of people during inflation. Furthermore, it is a very tiring period due to shoe leather costs and also very expensive since prices go up, causing us to cut back from some natural habits we used to have e.g. going out for a dinner at a nice restaurant with your family.
The Term Paper on Cost Accounting Variance Price Actual
Executive Summary By looking at the calculation result from Appendix, we are aware that the efficiency variances for material, labour and variable overhead, the labour price variance and spending variance for variable and fixed overhead turn out to be unfavourable and favourable. These results can be used to evaluate the Jigsaw department, and give the performance evaluation of Jason Cheng ( ...
