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Page 1: Inflation Edited
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Inflation - is a sustained increase in the general price level of goods and services in an economy over a period of time.When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.

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Why Inflation is a problem?Primary symptom of inflation is a rise in prices of consumer goods.Inflation can be a problem when it is unexpected or very high, which can result in economic instability and people being afraid to spend money, which hinders economic growth.

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Furthermore, inflation can make products and services unaffordable to those on fixed-income. It can also cause creditors to lose money and create a negative impact on a country's trade.

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Causes of Inflation

The main causes of inflation are either excess aggregate demand (economic growth too fast) or cost push factors (supply side factors)

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1. Demand pull inflationIf the economy is at or close to full employment then an increase in AD leads to an increase in the price level. As firms reach full capacity, they respond by putting up prices, leading to inflation. Also, near full employment, workers can get higher wages which increases their spending power.

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2. Cost Push InflationIf there is an increase in the costs of firms, then firms will pass this on to consumers. There will be a shift to the left in the AS.

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Positive effects:-Fundamentally, inflation gives everyone an incentive to spend and invest, because if they don't, their money will be worth less in the future. -Labour-market adjustments-nominal wages are slow to adjust downwards.-Mundell–Tobin effectThe Nobel laureate Robert Mundell noted that moderate inflation would induce savers to substitute lending for some money holding as a means to finance future spending.

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-Inflation reduces the real burden of debt, both public and private. -Inflation keeps nominal interest rates above zero, so that central banks can reduce interest rates, when necessary, to stimulate the economy.-Inflation reduces unemployment to the extent that unemployment is caused by nominal wage rigidity.

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Negative effects

-increase in the opportunity cost of holding money-uncertainty over future inflation which may discourage investment and savings -if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future.-High or unpredictable inflation rates are regarded as harmful to an overall economy.

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-purchasing power is redistributed from those on fixed nominal incomes, such as some pensioners whose pensions are not indexed to the price level, towards those with variable incomes whose earnings may better keep pace with the inflation-

There can also be negative impacts to trade from an increased instability in currency exchange prices caused by unpredictable inflation.Cost-push inflationHoardingHyperinflation

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Solutions to solve the Inflation;

In order to solve inflation, the government can resort to various acts. The government can regulate the transfer of foreign currency reserves. The government can impose restrictions in the transfer of foreign currency reserves outside of the country. This will be able to lessen inflation because the depletion and reduction of the foreign currency reserves will be prevented.

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Another act that the government can do to solve the problem of inflation is to lift certain import controls. By lifting import controls, a country is able to increase the supply of certain products and services since more foreign products will be able to enter the domestic market of a country. This will result to the balancing of supply and demand.

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The government plays a significant role in the development of the economy and in the fight against inflation. Therefore, it is imperative to allow the government to perform regulatory acts that will prevent or eliminate inflation.

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Statistical Updates

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Last Previous Highest Lowest Unit Reference Frequency

Venezuela 68.50 63.61 115.18 3.22 percent Dec/14 Monthly [+]

South Sudan

58.70 51.90 79.50 -14.00 percent Aug/15 Monthly [+]

North Korea

55.00 70.00 4376.00 30.00 percent Jul/13 Monthly [+]

Ukraine 52.80 55.30 530.30 -1.20 percent Aug/15 Monthly [+]

Syria 39.70 38.60 121.29 -31.05 percent May/15 Monthly [+]

Central African Republic

25.58 17.47 51.73 -10.67 percent Jun/14 Monthly [+]

Malawi 23.00 22.20 37.90 6.30 percent Aug/15 Monthly [+]

Ghana 17.30 17.90 63.00 0.40 percent Aug/15 Monthly [+]

Russia 15.80 15.60 2333.30 3.60 percent Aug/15 Monthly [+]

Argentina 14.70 14.80 20262.80 -7.00 percent Aug/15 Monthly [+]

Inflation Rate ( World )

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Region

Philippines

NCR - National Capital Region AOMM - Area Outside Metro Manila CAR - Cordillera Administrative Region

Region I – Ilocos

Region II - Cagayan Valley

Region III - Central Luzon

Region IVA – CALABARZON

Region IVB – MIMAROPA

Region V – Bicol

Region VI - Western Visayas

INFLATION RATES BY REGION (2006-BASED CPI SERIES), 2015, ANNUAL GROWTH RATE

2015M1 2015M2 2015M3 2015M4 2015M5 2015M7 2015M8

2.4 2.5 2.4 2.2 1.6 0.8 0.6

1.5 2.2 1.9 1.5 0.7 0.8 0.2

2.7 2.6 2.6 2.3 1.8 0.8 0.8

2.5 2.2 2.4 2.4 1.2 0.6 0.9

2.4 1.6 2.5 2.6 1.8 0.6 1.0

2.0 1.9 2.4 2.7 2.6 1.7 1.5

1.7 1.9 2.2 2.0 1.6 0.4 0.9

2.3 2.3 2.3 1.8 1.2 0.0 -0.2

3.2 3.0 2.8 2.5 1.7 0.7 0.3

3.2 2.5 2.6 2.5 1.5 0.6 -0.2

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Region VII - Central Visayas

Region VIII - Eastern Visayas

Region IX - Zamboanga Peninsula

Region X - Northern Mindanao

Region XI – Davao

Region XII – SOCCSKSARGEN

Region XIII – Caraga

ARMM - Autonomous Region in Muslim Mindanao

3.4 2.9 2.8 2.7 2.2 1.1 1.1

4.1 3.4 3.2 3.2 2.5 2.5 2.1

2.4 1.9 1.7 1.7 1.7 1.2 0.9

3.4 3.6 3.3 3.6 3.3 2.6 2.4

3.5 2.8 2.8 2.9 1.6 0.1 -0.2

3.5 3.1 3.6 3.3 2.6 2.2 1.8

3.5 2.9 2.8 2.8 2.7 2.3 2.1

3.6 3.1 3.3 3.0 2.8 1.3 1.0

2015M1 2015M2 2015M3 2015M4 2015M5 2015M7 2015M8