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Inflation:causes and solving
Macro & Microeconomics
Pages 4 (1004 words)
The summary of the article helps to define inflation as a persistent rise in prices that cause the purchasing power of a nation to significantly drop. This is a normal economic syndrome as long as the annual rate or percentage remains comparatively low…
The summary of the article helps to define inflation as a persistent rise in prices that cause the purchasing power of a nation to significantly drop. This is a normal economic syndrome as long as the annual rate or percentage remains comparatively low.Once the percentage rises over a pre-determined level, it is considered an inflation crisis And then it has its impacts across several facets of the economy.From the article, one can infer that expansive public spending as a result of budgetary surpluses, population growth, and rapid growth in demand are the root causes of inflation. By definition, a budgetary surplus is the amount by which government revenue exceeds government expenditure during a financial year. This excess of revenue over expenditure means the government has more money to inject into the economy and up the circulation of money in the economy. In an unrelated manner, the amount of money in circulation in a country's economy could result from the government printing an excess of money to deal with a crisis. This brings excess money to the disposal of citizens who would normally manifest their propensity to spend by a growth in their demand. As a result, prices end up rising at an extremely high speed to keep up with the currency surplus. This is called the demand-pull, in which prices are forced upwards because of a high demand.
On the other hand, population growth could be the direct effects of human factors like migration or high birthrates. That is to say the higher the birth rate, the higher the population at any particular time. ...
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