inflation Flashcards
It is the economic phenomenon in a country where there is increase in the general prices of commodities especially the basic ones.
inflation
kinds of inflation
Demand – pull
Costs-push
It is where prices go up as a result of more demand exceeding the available supply in the market.
Demand – pull
It is where prices go up as a result of increase in the costs of expenses incurred in producing and distributing the products which pushes their selling prices.
Costs-push
CAUSES OF INFLATION
Monopoly
Presence of middlemen
Oil deregulation
Foreign loans
Costs of Production
Too much money in circulation
- A business/businessman who has of the product or business or service can increase the price of his/her//its product or service
MONOPOLY
(wholesalers or retailers or agents , etc.) are involved in product distribution, the higher is the price as it finallt reaches each of them will apply price mark-ups for profit purposes
PRESENCE OF MIDDLEMEN – The more middlemen
- if prices of oil products will not be regulated by the government, the tendency and possibility is for oil companies like Petron, Shell, Caltex, etc. can freely increase the prices of oil products thereby pushing up prices of affected products .
OIL DEREGULATION
government’s payment to international financial institutions like World Bank and IMF and ADB comes from the annual national budget of the government, hence, the government has limited capacity to give subsidies to different businesses so that they will not increase prices of their products.
FOREIGN LOAN-
if the total expenses of producing products go up/ increase, their selling prices will have to increase also.
COST OF PRODUCTION –
Money is either spent or saved. If the people have more money their tendency is to spend thereby increasing demand for different products/ commodities/ services, later resulting to shortage. If this happen, the tendency of prices is to go up/ increase.
TOO MUCH MONEY IN CIRCULATION-
CYCLE SHOWING THE EFFECTS OF INFLATION
HIGH PRICES
MORE PROFIT FOR BUSINESS
MORE BUSINESS EXPANSION
MORE JOBS OPENINGS
MORE INCOME FROM SALARIES/ WAGES
MORE DEMAND FOR DIFFERENT PRODUCTS