Go to the above website (click here) and answer the following questions below this post and to present to your classmates:
1. Choose a country
2. What is the highest/lowest inflation rates they have experienced?
3. What are the most/least weighted items in their basket of goods?
4. What is the current rate of inflation in your chosen country and what are the principal factors currently affecting the inflation rate?
1. Country - United Arab Emirates
ReplyDelete2. Highest Inflation Rate: 12.3%
Lowest Inflation Rate: -1.6%
3. Housing - 39% (of the total weight)
Food and Soft Drinks - 13.9%
Transportation - 9.9%
Textiles, Clothing and Footwear - 7%
Communications - 6.9%
Miscellaneous Goods and Services - 5%
Restaurants and Hotels - 4.3%
Furniture and Household Goods - 4.2%
Education - 4%
Recreation and Culture - 3%
Beverages and Tobacco - 2%
Medical Care - 1%
39 + 13.9 + 9.9 + 7 + 6.9 + 5 + 4.3 + 4.2 + 4 + 3 + 2 + 1 = 100.2
4. The current rate of inflation in the U.A.E is 1.3% and the principal factors affecting it are the Consumer Price Index (CPI), the Money Supply and all the components of aggregate demand. The U.A.E's inflation rate is fairly low because even though there is growth in the money supply, it is not rapid. Moreover, the CPI (which includes housing) is increasing but very gradually, so cost-push inflation is not occurring. Lastly, although the balance of trade (X-M), consumer (C) and government (G) spending are rising, increasing aggregate demand, they aren't high enough or rising fast enough to cause demand-pull inflation.
Country: Pakistan
ReplyDeleteHighest Inflation Rate: 37.81%
Lowest Inflation rate: -10.32
In Pakistan, most important categories in the consumer price index are food and non-alcoholic beverages (35 percent of total weight); housing, water, electricity, gas and fuels (29 percent); clothing and footwear (8 percent) and transport (7 percent). The index also includes furnishings and household equipment (4 percent), education (4 percent), communication (3 percent) and health (2 percent). The remaining 8 percent is composed by: recreation and culture, restaurants and hotels, alcoholic beverages and tobacco and other goods and services
Pakistan’s current rate of inflation is approximately 9.08%. One of the main factors that affect the rate of inflation is Money supply- printing money. This is because printing money erodes the value of the currency causing the average prices in the economy to rise. Governments in desperate climates print money to stimulate a stagnant economy as initially this causes growth and unemployment to rise. The high levels of inflation in Pakistan are predominately caused by cost-push inflation, which describes a rise in prices due to an increase in the cost of production. Currently, Pakistan is in a negative balance of payments as the demand for imports exceeds the value of exports. This is because Pakistan purchases necessities such as water and energy from other economies. Thus, if these economies are damaged by a global recession, the increase in prices of imports will damage the Pakistani economy.
Mustafa Zaidi