Qualification > Commerce
ALL ECONOMICS DISCUSSION, PAPERS HELP HERE!!
rhea:
--- Quote from: Arsenal<3 on June 08, 2010, 05:08:13 pm ---Why are you going into so much detail
There are many causes for inflation, depending on a number of factors. For example, inflationcan happen when governments print an excess of money to deal with a crisis. 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.
Another common cause of inflation is a rise in production costs, which leads to an increase in the price of the final product. For example, if raw materials increase in price, this leads to the cost of production increasing, which in turn leads to the company increasing prices to maintain steady profits. Rising labor costs can also lead to inflation. As workers demand wage increases, companies usually chose to pass on those costs to their customers.
Inflation can also be caused by international lending and national debts. As nations borrow money, they have to deal with interests, which in the end cause prices to rise as a way of keeping up with their debts. A deep drop of the exchange rate can also result in inflation, as governments will have to deal with differences in the import/export level.
Finally, inflation can be caused by federal taxes put on consumer products such as cigarettes or fuel. As the taxes rise, suppliers often pass on the burden to the consumer; the catch, however, is that once prices have increased, they rarely go back, even if the taxes are later reduced. Wars are often cause for inflation, as governments must both recoup the money spent and repay the funds borrowed from the central bank. War often affects everything from international trading to labor costs to product demand, so in the end it always produces a rise in prices.
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thankyou!
also, could u explain market failure and its causes?
i know what it is, just cant fame an answer!
Freaked12:
--- Quote from: rhea on June 08, 2010, 05:20:24 pm ---thankyou!
also, could u explain market failure and its causes?
i know what it is, just cant fame an answer!
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I have already wrote the causes in my previous post
so before you write the causes
just write this
the term "market failure" does not mean that a given market has ceased functioning. Instead, a market failure is a situation in which a given market does not efficiently organize production or allocate goods and services to consumers.
http://en.wikipedia.org/wiki/Microeconomics
YNWA:
--- Quote from: Arsenal<3 on June 08, 2010, 04:41:26 pm ---Inflation tends to increase spending and encourage borrowing at the expense of savings. If prices are rising quicker than incomes, individuals will tend to buy at current prices before goods and services become more expensive and less affordable. Some consumers may buy using higher levels of debt (i.e., borrowing) than otherwise might the case. Savings may be discouraged because with high inflation when the money saved is repaid, it can be worth much less than when it was lent and the real rate of interest may be low. The real rate of interest rates fail to keep pace with inflation the saver loses purchasing power, i.e., their ability to buy things falls. Rising prices are a boon to borrowers because the repayment of interest and the sum borrowed (i.e., the principal) is with lower valued money. Inflation reduces the real value of the amount they owe, as the sum repaid has less purchasing power. Of course, any gain by borrowers must be weighed against the interest they must pay.
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Inflation causes the average level of prices to rise so wouldn't consumers spend less because their purchasing power is now reduced?
This would lead to a fall in aggregate demand for goods and services and consequently firms would lay-off workers due to fall in derived demand. Isn't this how inflation creates unemployment in an economy? If people increase their spending then wouldn't firms increase their output, possibly increasing employment? :S
So perhaps your answer holds true for when the rate of inflation is RISING in the economy rather than when inflation simply exists.
rhea:
--- Quote from: Arsenal<3 on June 08, 2010, 05:33:45 pm ---I have already wrote the causes in my previous post
so before you write the causes
just write this
the term "market failure" does not mean that a given market has ceased functioning. Instead, a market failure is a situation in which a given market does not efficiently organize production or allocate goods and services to consumers.
http://en.wikipedia.org/wiki/Microeconomics
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umm could you tell me which post was that?
the number?
Freaked12:
--- Quote from: rhea on June 08, 2010, 05:44:57 pm ---umm could you tell me which post was that?
the number?
--- End quote ---
reply:453
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