INFLATION

Prepared by: Group 2,

MLS 2-D

Inflation
Definition of Inflation
General Meaning
Economic Context
Causes of Inflation
Factors on Demand Side
Factors on Supply Side
Effects of Inflation
Economic Effects
Socio-Political Effects

Losers

and Winners in
Inflation
Losers
Fixed income earners
Savers
Creditors
Holders of security
Winners
Debtors
Fixed asset owners
Producers

Inflation

Four Main Types of

Inflation
Creeping Inflation
Walking Inflation
Galloping Inflation
Hyperinflation
Statistical
Unemployment Rates
Worldwide
Asia
Philippines

Some Reasons of
Unemployment
Worldwide
Asia
Philippines
Top 5 Lowest
Unemployment
Rates
Top 5 Highest
Unemployment
Rates

Inflation is a state in which the

value of money is falling and
the prices are rising.
- C. Crowther

What is Inflation?
The

rate at which the

general level of prices
for goods and
services is rising, and
subsequently,
purchasing power is
falling.

Economic Context
The

word Inflation
refers to general
rise in prices
measured against a
standard level of
purchasing power.

Causes of Inflation

Factors on Demand Side

Rapid

growth of population
Mounting government expenditure
Deficit financing

Factors on Supply Side

Erratic

agricultural growth
Hoarding
Inadequate rise in industrial production
Heavy taxation
Exports and imports

Effects of Inflation

Economic Effects
Add

inefficiencies in the market

Uncertainty about the future purchasing
power of money discourages investment
and saving.
Negative impacts to: trade from an
increased instability in currency
exchange prices caused by
unpredictable inflation.

Economic Effects
Higher

income rates
There is increase imports and reduce
exports, leading to a deficit in the
balance of trade.

Socio-Political Effects
Price

increases make
people unhappy and
different groups in
society start blaming one
another for increases in
the cost of living.
When rents, service
charges, bus fares or taxi
fares are raised, the
frustration often causes
social and political
unrest.

Losers and Winners

Losers
Fixed

Income Earners
(including
pensioners)

People

who have fixed

income such as labourers
and office workers cant
keep up with the high prices
because theyre income
doesnt rise with prices.
Real income of workers:
diminishes

 Savers
The

interest rate of savings deposit may

not cover the cost of inflations.
If money is withdrawn during the time
when prices are high, that money will
lose purchasing power.

 Creditors
The

same with Savers, by the time they

will receive the money payment they
also have less purchasing powers
Money they receive: cheap
Interest payment is less than the
Inflation rate

 Holders
Their

of Securities

money invested in securities

depreciates in terms of purchasing
power

Winners
Debtors
They

are paying back cheap pesos to

their creditors that have less purchasing
power.

Fixed
Land

Asset Owners

owners gain during inflation as the

value of land and other fixed assets
appreciate.

 Producers
The

income of producers increases

when inflation takes place.
As the price of commodities increases,
business firms gain higher returns.

Four Main Types of

Inflation

Creeping Inflation
Creeping

or mild inflation is when prices

rise 3% a year or less.
According to the US Federal Reserve,
when prices rise 2% or less, it is
beneficial to the economy.
This sets the expectations that prices
will continue to rise.

Walking Inflation
Strong;

inflation is between 3%-10% a

year.
Harmful to the economy.

Galloping Inflation
Inflation

rises to 10% or greater.

Absolute havoc in the economy.
Must be prevented.

Hyperinflation
Prices

rise more than 50% a month.

Very rare.

Statistical
Unemployment
Rates

Worldwide

Asia

Philippines

Some Reasons of
Unemployment

Worldwide
Inflation.
Rapid

changes in technology.
Disability.
Willingness to work.
Discriminating factors.

Asia
Have

not worked for so long.

Not willing to take a job for less money
or less impressive title.
Reputation precedes applicants.
Unwilling / unable to relocate where
applicants skills / experiences are
needed.

Philippines
Overpopulation.
Unreasonable

job requirements.
Clueless job applicants.
Inability to take on available jobs or
seize opportunities.
Lack of quality graduates.
Oversupply of labour force on popular
careers.

Top 5 Lowest Unemployment

Rates
Thailand
Singapore
Hong

Kong
Norway
Malaysia

0.62%
1.8%
3.2%
3.3%
3.4%

Top 5 Highest Unemployment

Rates
Turkmenistan

60%
Burkina Faso (West Africa)
77%
Liberia
85%
Nauru (Oceania)
90%
Zimbabwe
95%