PHILIPPINE'S INFLATION
Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time.
-Wikipedia
Inflation is one most talked word in the contemporary society. This is a big problem that plagues all the economy. Almost everyone knows what inflation exactly is, but it remains a source of great deal of confusion because it is difficult to define it unambiguously. Inflation exists when money supply exceeds available goods and services that causes national poverty.
According to Bloomberg " Inflation Is Not a Problem (Yet) Yes, prices are rising faster, but all signs suggest it won't amount to much. ... He famously said, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”. Inflation is good when it is mild. There are two situations where this occurs. The first is when inflation makes consumers expect prices to continue rising. When prices are going up, people will buy now rather than pay more later. This increases demand in the short term. As a result, stores sell more and factories produce more now. They are more likely to hire new workers to meet demand. It creates a virtuous cycle, boosting economic growth. The second is when it removes the risk of deflation. That’s when prices fall. When that happens, people wait to see if prices will drop more before buying. It cuts back demand, and businesses reduce their inventory. As a result, factories produce less and lay off workers. Unemployment rises, leading to wage deflation. Workers have less money to spend, which reduces demand even more. Businesses lower their prices. That makes deflation worse. For this reason, deflation is even more corrosive to economic growth than inflation.
But we believe that inflation rate can cause national poverty because Inflation tends to hit not the poorest in society, but, the middle classes with savings. If you have cash savings, high inflation can destroy your wealth. The poorest often have little savings and are so not affected by inflation. (indeed the poorest may have debts which get wiped out by inflation) Also this point is largely academic in the post war period. As we have never really had a period of hyperinflation where real interest rates were negative.
Inflation would be a long-term effect of poverty. Poverty would cause aggregate demand in an economy to fall, which first reduces prices. We cannot call it deflation as it is not a persistent fall in costs. As prices fall, the population under the poverty line, would spend most of their savings to buy the goods which they might probably not afford later. Even the others would buy more, causing less of a surplus. If there is a lack of goods, imports would increase, causing a net outflow of money. As this demand increases, domestic firms will be encouraged to boost production by employing more or switch to a capital-intensive method of production. According to Cai Ordinario MORE Filipinos may fall deeper into poverty this year, given the high commodity prices being experienced by households nationwide for the past eight months, local economists said, as the economy posted a nine-year high inflation rate.“Higher prices, particularly higher food prices—as what we are seeing now—hurts the poor households more since 60 percent of their budget is spent on food. During periods when inflation rates are high—example [in] 2009—poverty incidence did not decrease significantly [from 2006],” University of the Philippines School of Statistics Dean Dennis Mapa Siad. Inflation also hurt yhe poor beacuse the poor are impacted more than others because they work at lowing paying jobs and wages almost always lag inflation. In addition, those on fixed incomes, who tend to be poorer, also suffer because their income rarely rises. As prices rise they are forced to make increasingly difficult choices between home, food, medicine, heat and utilities.
Hence, Inflation definitely cause of National poverty and also
High inflation is disadvantageous to the economy Inflation is caused when there is an increase of money supply previously. Therefore it is vital to understand the concepts of inflation.
-Wikipedia
Inflation is one most talked word in the contemporary society. This is a big problem that plagues all the economy. Almost everyone knows what inflation exactly is, but it remains a source of great deal of confusion because it is difficult to define it unambiguously. Inflation exists when money supply exceeds available goods and services that causes national poverty.
According to Bloomberg " Inflation Is Not a Problem (Yet) Yes, prices are rising faster, but all signs suggest it won't amount to much. ... He famously said, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”. Inflation is good when it is mild. There are two situations where this occurs. The first is when inflation makes consumers expect prices to continue rising. When prices are going up, people will buy now rather than pay more later. This increases demand in the short term. As a result, stores sell more and factories produce more now. They are more likely to hire new workers to meet demand. It creates a virtuous cycle, boosting economic growth. The second is when it removes the risk of deflation. That’s when prices fall. When that happens, people wait to see if prices will drop more before buying. It cuts back demand, and businesses reduce their inventory. As a result, factories produce less and lay off workers. Unemployment rises, leading to wage deflation. Workers have less money to spend, which reduces demand even more. Businesses lower their prices. That makes deflation worse. For this reason, deflation is even more corrosive to economic growth than inflation.
Inflation would be a long-term effect of poverty. Poverty would cause aggregate demand in an economy to fall, which first reduces prices. We cannot call it deflation as it is not a persistent fall in costs. As prices fall, the population under the poverty line, would spend most of their savings to buy the goods which they might probably not afford later. Even the others would buy more, causing less of a surplus. If there is a lack of goods, imports would increase, causing a net outflow of money. As this demand increases, domestic firms will be encouraged to boost production by employing more or switch to a capital-intensive method of production. According to Cai Ordinario MORE Filipinos may fall deeper into poverty this year, given the high commodity prices being experienced by households nationwide for the past eight months, local economists said, as the economy posted a nine-year high inflation rate.“Higher prices, particularly higher food prices—as what we are seeing now—hurts the poor households more since 60 percent of their budget is spent on food. During periods when inflation rates are high—example [in] 2009—poverty incidence did not decrease significantly [from 2006],” University of the Philippines School of Statistics Dean Dennis Mapa Siad. Inflation also hurt yhe poor beacuse the poor are impacted more than others because they work at lowing paying jobs and wages almost always lag inflation. In addition, those on fixed incomes, who tend to be poorer, also suffer because their income rarely rises. As prices rise they are forced to make increasingly difficult choices between home, food, medicine, heat and utilities.
