Inflation is the condition where there is increase in the price level of goods and services. There has been advantages and disadvantages of the inflation. The advantages of the inflation is it helps to counteract deflation. Deflation is the condition of fall in the prices, it makes people spend less as in the future the prices may get cheaper and increases the real value of the debt and reduction in the disposable income. It also helps to adjust the wages and the relative prices. The relative prices are important for the euro zone which has the single currency. It helps to adjust the value of the money. It helps to boost the economic growth. Inflation may have the advantages over the deflation but the major point is its drawbacks. Inflation damages the economic growth. It discourages the investment and long term economic growth. It reduces the value of the saving. The United Kingdom is the leading superpower country hit by recession in 2000s. It was the deep recession after the war. The manufacturing output declined by 7 % and it affected most of the economical sector such as bank and investment. The unemployment rate increased up to 8.1%. The unemployment decreases the gross domestic product (GDP). The economic condition of the country is on the edge leading to poverty and as government try to reduce the higher inflation how to write an application essay, recession hits the nation. The government of the UK has taken various major for the prevention of the higher inflation that leads to recession. It has implemented a policy to gain confidence to sustain the recovery. It has worked in various aspect to sustain the recovery such as financial, tax examples of personal statements for college scholarships, education, health, employment, equity, public governance, regional policy. The key policy it has recommended is ensuring the fiscal sustainability. It has focus to improve the educational outcomes with focus in skilled education and increase the quality of the vocational training and high quality apprenticeships positions. It has also focused in to increase efforts to make work pay and helps people to get jobs. It has also focused in the increase of efficiency in the tax system. It has prioritized the investment in innovation and infrastructure. The main ways to cure the inflation most of the country adopts fiscal and monetary policy. UK has adopted both the policy to sustain the recovery. It has completely involved all the major parts of the country such as tax system, education, employment and government to get relief from the higher inflation that leads the country to recession. Deflation is the condition where there is decrease in the price of the goods and products. It is the negative inflation. It increases the real value of the money which helps to buy more goods with the little amount of money. The deflation is the way to improve the condition of the inflation that leads to recession status of the economy of the country. Deflation is affected by various factors of which the most important are the aggregate demand and the supply. Deflation is caused by various factors such as change in structure of capital markets, increased productivity and decrease in currency supply. It has effect on the economy of the country. It causes various impact in economy such as reduced revenues observation essays, cutbacks on wages essay on academic goals, changes on the spending of the consumers, reduced credit. It has been playing vital role for the cure of the inflation. There are various benefits of deflation. It has affected the large two groups of the economy that is the consumer and the business. It benefits the consumer by various ways such as reduce the debts and increase in the savings. It helps to increase the quality of the vocational training and skills that helps to fond and retain the job that helps to feel security in the job. It has impact on the business as well. It is the counteract part for the business, consumer gets the positive part as business gets the negative part. Business has a positive part that is it can prepare for the worst. It can pre plan the strategy to survive in the deflative stage, do careful planning in the production, investment and inventory, re-evaluate the investment, cost and production. The business can pal the strategy to prepare the condition that helps it to survive in the condition. The deflation is the condition where the value of the money increases. The large amount of the goods and product can be obtained from the same amount of money. Stability in the economy is not possible for the company as the balance between the stability may fall to deflation condition to rise to inflation. Too deflation or inflation condition is not good for the economy of the country. High inflation may lead to the recession state of the country that damages the economy of the country. China has been established as the superpower country that has taken advantage of the inflation and deflation in the country where it exports and imports the good and the services leading to china price effect. In this essay, deflation can be taken as a solution to cure inflation but too much deflation may lead to poor condition of the country as well but inflation can be cure for inflation but too much inflation leads to recession. The main way to tackle both the situation is stability in the economy is the best way. Deflation is the condition where the prices of the goods and the services decreases and this is the phase where the savings increases and real value of the money increases. This is the time where the country and the economy takes the peak to recover from the inflation that led to recession. It helps to maintain the economy of the country. The individual country will execute the various measures and its expectation to control the inflation. The main measures will be applied in the costs and aggregate demand. The reduction in the cost can be obtained by controlling the wages. The control in the wages will lead to less expenditure. The next main measure is reduction in aggregate demand. The government executes fiscal and monetary policy. In the fiscal policy the government reduces the spending and budgeting. With the reduction in the government spending there is increase in the taxation and revenues. The taxation is increased to cope with the consequences of the inflation. The monetary policy is also implemented to control the inflation. Under the monetary policy, the demand is reduced by reduction of money supply through the sale of government securities and the reduction of bank reserve requirements. There is increase in the interest and the debts. These are the remedies applied for the control of the inflation. The controlling of inflation is the regarded as so important by government because higher inflation leads country into the recession. As recession hits the country it causes the great damage in finance and other important aspect of the country. Recession disables the economic growth of the country so that it has been the main focus for the government to control the inflation. For controlling of the inflation the government has to focus on the policy that involves all the aspect of the country including both financial and non financial aspect of the country. It focuses on the monetary and fiscal policy that helps to bounce back the financial status to normal. It would not, however, be correct to place the blame wholly at the door of the government or the trader. The consumer is no less to blame for the state of affairs. Some consumers allow themselves to be robbed for fear of a precarious supply position and consistently adverse price trends. Such practices not only deprive the country of much-needed resources but also serve as bad examples for those whose who cannot afford to pay such high prices. Higher Interest rates: Monetary policy can have an effect on inflation. At a time when a country witnesses high inflation rates learn essay writing, the Government often increases the interest rates. High interest rate is a mechanism to control inflation. Price Control: The prices of all the essential commodities of daily use. such as rice, wheat how to write a good application design, potato, milk, etc should be fixed and controlled. And adequate measures should be taken to ensure smooth supply of these items. Control Hoarding: Some traders indulge in hoarding of goods. They create artificial demand for the goods and charge high prices for the goods. The government should ensure that such malpractices doesn’t exist in society. Economists and some other people have been attempting scientific analyses to: In order to avoid monetary policy actions that might interfere with the funding plans of the Treasury, the Federal Reserve followed a practice of conducting “even-keel” policies. In practical terms, this meant the central bank would not implement a change in policy and would hold interest rates steady during the period between the announcement of a Treasury issue and its sale to the market. Under ordinary conditions, Treasury issues were infrequent and the Fed’s even-keel policies didn’t significantly interfere with the implementation of monetary policy. But as debt issues became more prevalent, the Federal Reserve’s adherence to the even-keel principle increasingly constrained the conduct of monetary policy (Meltzer 2005). Endnotes By the late 1970s, the public had come to expect an inflationary bias to monetary policy. And they were increasingly unhappy with inflation. Survey after survey showed a deteriorating public confidence over the economy and government policy in the latter half of the 1970s. And often, inflation was identified as a special evil. Interest rates appeared to be on a secular rise since 1965 and spiked sharply higher still as the 1970s came to a close. During this time, business investment slowed application letter is, productivity faltered, and the nation’s trade balance with the rest of the world worsened. And inflation was widely viewed as either a significant contributing factor to the economic malaise or its primary basis. Federal Reserve officials were not blind to the inflation that was occurring and were well aware of the dual mandate that required monetary policy to be calibrated so that it delivered full employment and price stability. Indeed, the Employment Act of 1946 was re-codified in 1978 by the Full Employment and Balanced Growth Act. more commonly known as the Humphrey-Hawkins Act after the bill’s authors. Humphrey-Hawkins explicitly charged the Federal Reserve to pursue full employment and price stability, required that the central bank establish targets for the growth of various monetary aggregates, and provide a semiannual Monetary Policy Report to Congress. 5 Nevertheless, the employment half of the mandate appears to have had the upper hand when full employment and inflation came into conflict. As Fed Chairman Arthur Burns would later claim, full employment was the first priority in the minds of the public and the government, if not also at the Federal Reserve (Meltzer 2005). But there was also a clear sense that addressing the inflation problem head-on would have been too costly to the economy and jobs. Gordon, Robert J. “Alternative Responses of Policy to External Supply Shocks.” Brookings Papers on Economic Activity 6, no. 1 (1975): 183–206. Meltzer, Allan H. A History of the Federal Reserve cars cause air pollution, Volume 2, Book 2, 1970-1986 . Chicago: University of Chicago Press, 2009. As the world’s reserve currency, the US dollar had an additional problem. As global trade grew, so too did the demand for U.S. dollar reserves. For a time good covering letter example, the demand for US dollars was satisfied by an increasing balance of payments shortfall, and foreign central banks accumulated more and more dollar reserves. Eventually, the supply of dollar reserves held abroad exceeded the US stock of gold, implying that the United States could not maintain complete convertibility at the existing price of gold—a fact that would not go unnoticed by foreign governments and currency speculators. While economists debate the relative importance of the factors that motivated and perpetuated inflation for more than a decade, there is little debate about its source. The origins of the Great Inflation were policies that allowed for an excessive growth in the supply of money—Federal Reserve policies. Bibliography But once in the position of having unacceptably high inflation and high unemployment, policymakers faced an unhappy dilemma. Fighting high unemployment would almost certainly drive inflation higher still, while fighting inflation would just as certainly cause unemployment to spike even higher. The Opportunity: Fiscal Imbalances, Energy Shortages, and Bad Data By this time hooks for essays about yourself, macroeconomic theory had undergone a transformation, in large part informed by the economic lessons of the era. The important role public expectations play in the interplay between economic policy and economic performance became de rigueur in macroeconomic models. The importance of time-consistent policy choices—policies that do not sacrifice longer-term prosperity for short-term gains—and policy credibility became widely appreciated as necessary for good macroeconomic results. From High Inflation to Inflation Targeting—The Conquest of US Inflation One of the most important reasons for inflation is the deficit budgeting. In order to cover the gap Pakistan has been printing more paper currency because foreign aid and taxes can not cover up the deficit. Therefore there will be greater circulation of paper money. There will be hike in prices of domestic used products as the purchasing power of the people has increased. Wrong taxation policy has also been responsible for the rise in prices. The hike in taxes results in greater desire to avoid taxes. Thus public takes wrong way of not paying taxes and there will be escalation in prices.
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