[%20Stable%20Prices:%20Inflation%20]

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Stable Prices Inflation

• Presented by
• David Byun
• Steven Kim
• Kenneth Chu

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What is inflation?

• Inflation is a persistent rise in the general
  level of prices.
• - ex) A typical atlas book
• 1970s 18.00 or even less
• 2000s 80.00 or even more

ltlt Inflation in movie ticket prices gtgt
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What Causes Inflation?
In general, there are two categories of the
causes Demand-Pull Inflation Inflation that
occurs when total demand for goods and services
exceeds the economys capacity to produce those
goods. Cost-Push Inflation Inflation caused
by an increase in the costs of production or in
profit levels, with the effect being on the
supply side.
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What Causes Inflation? - II
Demand-Pull Inflation
Demand gt Supply Inflation
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What Causes Inflation? - III
Cost-Push Inflation 1. Wage-Push
Inflation ex) Great Strike of 1988 in
Korea 2. Profit-Push Inflation ex)
Monopolization of a market 3. Import-Push
Inflation ex) Oil Crisis of 1970s
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Macroeconomic Goals
Ultimate Macroeconomic Goal
Stabilizing and controlling of the inflation rates
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Difficulties of Achieving the Goal

• Any serious stabilization effort will be
  difficult, risky, and prolonged because restraint
  tends to reduce real output and employment before
  benefits become apparent, whereas fiscal and
  monetary stimulus typically increases economic
  activity before prices accelerate.
• Our economy and market do need some inflations.
  In some cases, inflation initially increases
  business profits, wages, capital investments, and
  payments of dividends and interest. Also, it
  temporally improves the balance of trade and
  increases the amounts of taxes collected for the
  government spending.
• Historical Example German Inflation of 1930s

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Stabilization Measures

• Federal Reserve System
• Financial Reserves
• National-scale Regulation of Inflation
• Prevent Monopolizations
• Regulation of the market competition
• Command Competition
• Government Interference in Economy
• Wage Control (Labour-Management Relations)
• Regulation of International Trade (prevent an oil
  crisis)
• Income Policies

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Why Should Stabilization be Main Focus?

• Inflation affects every parts of a
  society/economy (Great Depression)
• Stabilization is the fundamental base of an
  economy. Without the safety and stability of a
  system, an economy cannot thrive. (Safety of a
  Fair)
• Uncertainty of prices will lead into less
  consumption, investment, and ultimately to a
  recession/depression

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Who Wants to be an economist?
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Sources

• Thanks for watching this presentation
• - Microsoft Encarta
• - Wikipedia Encyclopedia
• - Textbook
• - Couple of Online Articles
• - Mr. Ludwig