...WHAT IS INFLATION Inflation is best defined as a sustained increase in the general price level leading to a fall in the purchasing power or value of money MAIN CAUSES OF INFLATION * Demand-pull inflation: Demand-pull inflation is likely when there is full employment of resources and aggregate demand is increasing at a time when SRAS is inelastic. * Cost-push inflation: Cost-push inflation occurs when firms respond to rising costs, by increasing prices to protect their profit margins. There are many reasons why costs might rise: 1. Component cost- This might be because of a rise in world commodity prices such as oil, copper and agricultural products used in food processing 2. Rising labor costs-caused by wage increases, which are greater than improvements in productivity. Wage 3. Higher indirect taxes imposed by the government –A rise in the specific duty on alcohol and cigarettes, an increase in fuel duties or a rise in the standard rate of Value Added Tax. In the case of food rice demand and cost both are playing role. Inflation is an inevitable part of any economy. It is not always a bad thing though and it is necessary in a healthy economy. All in all, inflation keeps our economy going and the world turning, even if portrayed as a villain. HOW INCREASE IN FOOD PRICE IMPACT ON INFLATION The food price hike has accelerated the general inflation rate in the country. If the food price level rises at an existing rate of 1.31 percent per month and if adequate...
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...Essay on Inflation – a Major Cause of Inequality. Sri Bhabatosh Datta, the famous economist has clearly stated that: “The origin of inflation is often found in the panicky nervousness of unstable governments in olitically unstable communities. Given political stability there is no reason why India should not be able to carry out her future plans without generating serious inflationary pressure on the price level.” The percentage of inflation in regard to price movements and the purchasing power of the rupee need to be evaluated on the basis of wholesale price index (WPI) with 1950-51 as the base year. Unfortunately, the government with the intention of preventing a factual comparison of the purchasing power of rupee, keeps changing the base year every decade, from 1950-51 to 1960-61, later to 1970-71 and finally to 1980-81. Deficit financing in every five year plan and improper planning led to a 40 percent rise in food grains, 45 percent in cereals and over 70 percent rise in pulses during 1961-1966. The country was in the grip of a galloping inflation. This with 1950-51 as the base year. Keeping 1960-61 as the base year, the Fourth five year plan save the price index at an all time high of 331 in September 1974 (with 1961-62-100). This was due to a combination of several factors, the primary being the influx of refugees in large numbers from Bangaldesh and the expenses incurred by the government on them, failure of Kharif crops in 1972-73 and complete failure to take over...
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...Introduction China is a global hub for manufacturing, and is the largest manufacturing economy in the world as well as the largest exporter of goods in the world. China is also the world's fastest growing consumer market and second largest importer of goods. China is a net importer of services products hence obtained an average annual Growth Domestic Product (GDP) growth of 9.10%. China has been an economic power house since the 70s, and ranked the 2nd largest economy in the world ever since. Presently, the Central Bank of China has adopted a Long Term Economic Policy, designed to reduce rural-urban income inequality, reduce centralized planning and to attract Foreign Direct Investments (FDIs) to boost their economy growth. China has also adopted several trade policies to liberalize their economy to encourage global trade. This will not only benefit the country, but the rest of the world consequently. This essay will attempt to analyze the performance trend of China’s economy with the consideration of the Production output performance analysis, Labour market analysis and Price level analysis. GDP growth rate Fig 1a) China’s annual GDP growth rate from 2004 – 2014 (Tradingeconomics.com, 2014). As shown in Fig 1a), China is seen to have a positive economic growth from 2004-2014 and a spike in it’s growth rate in 2007 before the global financial crisis in 2008. China then took a steep fall in 2008-2009 to 6.3% GDP per annual. The reason behind the plummet is due to capital...
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...A disturbing sign of decline in the American economy has caused many to sound the alarm bells. Income inequality represents a significant danger to the nation and is growing worse over time, leading the 2013 winner of the Nobel Prize in Economics to call it, “The most important problem that we are facing now” (Christofferson, 2013). A significant contributing factor to this is the stagnant minimum wage. Raising the minimum wage will not only decrease income inequality, but also raise millions out of poverty, spur consumer spending, and ultimately lead to a more efficient workplace and workforce. Therefore, America needs to adopt one of the currently proposed $10.00+ minimum wage policies being discussed in the political arena and ensure it is being used in a responsible way to fight these problems. The federal minimum wage has went without a change for nearly a decade twice, from 1981 to 1990 and 1997 to 2007. There have been many more multi-year gaps as well (Federal, n.d.) As a result, the minimum wage has not kept pace with inflation over the last 40 years. The purchasing power of the $7.25 minimum wage set in 2009 has already dropped by 5.8% by 2013 (DeSilver, 2013). Since 1968 the power of the minimum wage is down 23% after adjusting for inflation (Boushey, 2014). There is, however, another way of weighing the minimum wage instead of just against inflation. In 1968 the minimum wage was 53% of the average wage for hourly lower level employees, compared...
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...1. What is the inflation rate? Is inflation a worry or are we in a period of stable prices? Inflation is the overall increase of price for goods and services. Inflation rate is the percentage in which the prices increases on goods and services. This rate is typically determined by the Consumer Price Index (CPI) and the Producer Price Index (PPI). The Bureau of Labor Statistics generates data monthly on the changes of prices. To calculate the inflation rate, you would take the difference in price from two different period of times (years), divide the answer by the original price and multiply that by 100 to get the percentage. The current inflation rate of the United States was calculated through August 2014 and published on September 17 at 1.7%. Price stability is achieved when prices stay constant over an extended period of time or the fluctuation is minimal and easily determined. Currently inflation is at a low but does not necessarily mean the economy is out of trouble. These lower prices may be a prediction to possible problems in the future of the global market. Therefore current inflation is not a concern but its current decrease may be a concern for the future. Websites: http://www.investorwords.com/2452/inflation.html www.bls.gov/cpi/ www.usinflationcalculator.com/inflation/current-inflation-rates http://www.marketwatch.com/story/fading-inflation-good-for-consumers-but-hints-at-lurking-threats-2014-10-19 2. What is the unemployment rate? Will a high unemployment...
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...between 18 to 65 live in poverty this fact highlights that how poverty is impacting people across different age groups. Poverty today is not about problem of one specific individual it is every body`s problem, if one part of society experiences success then the other part experiences poverty. Poverty eradication should be taken up as a matter of fundamental importance because of its direct impact on development of country. Definition of Poverty Important to understand is that what exactly is poverty? Basically poverty is a state or condition in which a person is unable to maintain a standard of living suitable to his physical and mental efficiency. In acute case of poverty people often fail to meet their basic set of requirements like food or...
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...of Inflation: A Study in the Context of Bangladesh Mohammad Nayeem Abdullah1 Robaka Shamsher2 Newaz Ahmed Chowudhury3 Abstract In Asia, Bangladesh is one of the hardest hit by the current wave of inflation and oil price hike. The economy has been observing double digit inflation growth on point-to-point basis since July 2007. In Bangladesh, the correlation between per capita income and food weight in total Consumer Price Index (CPI) is one of the highest in the world and the economy is vulnerable to sharp hikes in fuel and non-fuel commodity prices. The BDTUS$ exchange rate has been depreciating steadily for some time, reaching a record high of BDT 72.70 per USD in January 2011, which has direct impact on food inflation that Bangladesh is currently experiencing. An International Monetary Fund (IMF) study shows food prices on headline inflation has been a staggering 55.9 percent in Asia in 2007, whereas the figure was 34.1 percent in the 2000-06 period. The researchers highlight that a further depreciation of the BDT could lead to additional cost push inflation for Bangladesh. This article attempts to investigate causes and consequences of inflation on the economy of Bangladesh. This paper also reviews the past record of the inflation and makes a forecast on the possible movement of inflation. At the end on the paper the researchers forward some strategic points that might be useful to reduce inflation. Keywords: Food inflation, oil price hike, general inflation, world food price...
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...Supply and Demand Globally Shirley Leo Argosy University This discussion will include the definition and how it is used to determine the demand for labor. The factors used to determine the supply of labor market will be discussed. This will include the factors that have changed the supply of labor market over the last twenty years. Price and quantity of labor determination over a period of will be explained. Income inequalities will also be determined, if there are any. The way that income inequalities are measured, and how they have changed from 1980 to the present will be discussed. What role does the government play in the terms of inequality? There will also reasons for this and against this provided. Next, nations trading will be discussed. The concept of “Comparative Advantage” will be discussed. If a nation had an isolation policy would they be better off economically will also be answered. Then the trade balance of the United States will be discussed. The problems with having a negative trade balance, and how it can be corrected will be included in this discussion. The last thing that will be discussed is the exchange rates. The significance of currency devaluations concerning the United States, as well as other countries will be the last thing discussed. Now, to discuss derived demand. Derived demand is the product that is produced...
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...Outline the evidence for social class inequality in the UK today (20) Reasons for why there is social class inequality in the UK today are due to that there is material deprivation, mental health, poverty and education. Working class people have more time off work, have more visits to the doctor and they are more likely to be chronically. This is because they cannot afford a good standard of living such as the buying of food which is fresh and contains lots of nutrients and healthy vitamins which prevent an individual from being ill. This is why the middle class do not take as much time off work and are less likely to become ill. Therefore, a reason for social class inequality is due to material deprivation; meaning that an individual has insufficient physical resources – food, shelter, and clothing – necessary to sustain life either in an absolute sense or relative to some prescribed standard. Social inequality leads to stress and pressure for the individual as they are always trying to better themselves which then leads to mental health problems. Wilkinson found a correlation between the inequality within a country and mental health issues within individuals. This can be used in support for the working class as they are bottom end of social inequality receiving the worst of it and why so many of them become chronically ill. Poverty is something which can be given for evidence for social class inequality. It has been said that overall of ‘breadline poor’ households has increased...
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...dollar, as shown in the graph below. The exchange rate between the Indian rupee and the US dollar over the past five years are: 43.319 in 2008, 48.405 in 2009, 45.726 in 2010, 46.671 in 2011, and 53.437 in 2012. (CIA) This means that one US dollar is equivalent to 53.437 rupees, in the year of 2012. This also means that the value of rupee is depreciating. A weaker rupee has its pros and cons. A weaker currency will make imports more expensive, the price of oil and other materials to import from foreign countries will go up. Since one of the big imports of India is crude oil, it only makes the economy worse. Higher oil price means higher transportation price, so therefore producing products will be more expensive and that leads to higher inflation. Rupee depreciation has its bright side for companies that exports goods. Exporters are the biggest beneficiaries of depreciation of rupees because every dollar they earn will turn into more rupees. One of the major issues in India is the outpouring population growth. It is the second most populated country in the world, just after China. The current population of India is approximately 1,220,800,359 as of July 2013 with 1.28 percent population...
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...MEMBERS:IFTESHAM ARA JAHAN 082604030FARIHA NOWSHIN HAQUE 1020276030MINHAZUR RAHMAN 081314030MUSA HABIB KISHAN 0930442030NUSRAT MINALLAH SHOSHI 0910283030SIDRATUL MUNTAHA KHAN 0920517530 | Table of Contents Analysis of Bangladeshi Taka (BDT) against US Dollar($) 3 Factors that influences BDT 5 Analysis of Macroeconomic variables 7 Income level 7 Fig: Income receipts of Bangladesh from 2005-2012in US dollar 8 Income payments (US dollar) in Bangladesh 8 Effects of inflation on income 9 Effects of interest rates on income level: 11 Theory of Interest Rate Parity and BDT 12 Theory of Purchasing Power Parity 14 Theory of International Fisher Effect against BDT 16 Regulations on foreign currency transfers/remittances 16 Analysis of investment opportunity for US-based MNC 17 Analysis of Bangladeshi Taka (BDT) against US Dollar ($) Exchange rates play a vital role in a country's level of trade. This is critical to almost every free market-oriented economy in the world. Numerous factors such as inflation, interest rates, current-account/trade balance, public (government) debt and political environment determine exchange rates and all are related to the trading relationship between any two countries. The exchange rate, measured as a number of units of local currency per unit of foreign currency, is the price of the foreign currency in terms of the local currency. Like any other price, the value of...
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...expectancy b. literacy c. average GDP Despite gains it has made on the economic front, the Philippines remained at 114th globally for the 5th straight year in the Human Development Index (HDI) released by the United Nations Development Program (UNDP) on Friday, March 15. The HDI is a key indicator of citizens' state of health, education, and income, among others. In the 2013 Human Development Report titled "The Rise of the South: Human Progress in a Diverse World," the UNDP said the Philippines' HDI score has been improving in the past 30 years. But its score -- 0.654 -- is still slightly below the East Asia and the Pacific regional average of 0.683. (A total of 186 countries were covered by the UNDP study.) Some data on the Philippines from the 2013 HDR include the following: * The life expectancy of Filipinos is 69 years old. * The mean years of schooling in the Philippines is 8.9 years while the expected years of schooling is 11.7 years. * The country's Gross National Income per capita level is $3,752 (computed using 2005 purchasing power parity) * The country ranked 77th overall in the Gender Inequality Index, the third lowest rank in the ASEAN. * Around 18.4% of the population lived below $1.25 in the 2011-2012 period. * Some 9.1% of the population is vulnerable to poverty while 5.7% are living in severe poverty. * Debt servicing was the highest public sector expense and accounts for 6.5% of Gross Domestic Product (GDP) in 2009. *...
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...Running head: INCOME DISTRIBUTION IN THE UNITED STATES Income Distribution in the United States and the Lorenz Curve 1 Market economies are favored and well-known for generating macroeconomic growth and progress in industrialized nations, such as the United States. Numerous academic studies and economic research have been done not only to measure economic growth, but also to analyze any disparities in income distributions among the general American population. This paper will examine trends and patterns of American wages since the 1970s, focusing on shifts in income distributions to see if these shifts can be interpreted as income inequality across different sectors of our society. Furthermore, this paper will study two important and interlinked methods of measuring income inequality, which are the Lorenz Curve and the Gini Coefficient Index. The Executive Branch of our federal government and the U.S. Congress keep a close eye on income distributions throughout the entire nation. These bodies rely heavily on data collected and analyzed by non-partisan agencies such as the U.S. Census Bureau, the Internal Revenue Service (IRS), the U.S. Bureau of Economic Analysis, the Congressional Budget Office (CBO), and academic institutitions that provide data and statistical analysis to assist in economic and budgetary decisions made by elected officials concerning a wide array of policy issues such as taxes, social insurance programs and other issues that impact the overall economy...
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...According to the political section in this paper, 1994, and its democratic transition has also been a significant transitional year for South Africa’s economy. As stated in the Economist (2010) South Africa is the biggest economy in Africa; furthermore, the World Bank has ranked South Africa as an upper middle-income economy (which accounts for an income of $4,086 to $12,615 per annum) as like as Brazil and China. Additionally, taken several factors into account, the Heritage Foundation (2013) scores South Africa’s economic freedom as the 75th (out of 186) in the 2014 Index. To assess a country’s performance, one looks at its GDP development, or in particular the real GDP growth, as a main indicator for a countries performance. Figure X reveals South Africa had a substantial growth over the years except from 2009. Because of its global integrated economy, it has not been unaffected by the global crisis. Nevertheless, BRIC countries have been less affected, looking at the aggregated figures in Figure X. Figure X: Economic Indicators Source: OECD (2013) In Figure X2 you can see the diverse economy of South Africa and the key sectors roughly contributing to the GDP. Figure X2: Composition of South Africa’s Key Sectors contributing to GDP Source: Own Illustration, Statistics South Africa (2012) On the basis of the industrialization section in this paper, caused by South Africa’s de-industrialization, it failed to engage and develop the manufacturing industry as an accelerator...
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...WORKBOOK ANSWERS Edexcel A2 Economics Unit 4 The Global Economy This Answers document provides answers for the questions asked in the workbook. They are intended as a guide to give teachers and students feedback. Topic 1 Poverty and inequality in developed and developing countries Measuring poverty and inequality 1 A standard of living that fails to provide basic needs, such as food, shelter and clothing. (1 mark) Often measured by the number falling below a threshold level of income such as a $1.25 PPP a day. (1 mark) 2 The term refers to those who fall below a certain threshold income or poverty line. (1 mark) A standard of living that falls significantly below the majority. (1 mark) In the UK and EU, this is defined as those earning less than 60% of median income. (1 mark) 3 a Measures the percentage of households that experience overlapping deprivations in three dimensions: education, health and living conditions. (1 mark) A person who is ‘poor’ is deprived in at least 30% of the weighted indicators. (1 mark) b Used to measure absolute poverty in less developed countries (1 mark) and its variables are: the percentage of a population likely to die before the age of 40 years (1 mark); the percentage of people over the age of 15 years who are illiterate (1 mark); the percentage of children under the age of 5 years who are underweight (1 mark); the percentage of people without access to public and private services such as health care and...
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