which of the following could lead to moderate inflation?

Inflation can be reduced by policies that slow down the growth of AD and/or boost the rate of growth of aggregate supply (AS) Supply side policies seek to increase productivity, competition and innovation – all of which can maintain lower prices. Quote: Originally Posted by leastprime. However, a moderate level of inflation is required in the economy to ensure that production is promoted. Expert Answer 100% (4 ratings) Answer: c There may be the problem of deflation or decreasing the price level. For some countries, the higher part of this range is already "high inflation". How does inflation affect a country's well-being? Economists have a term for how much you can buy with your wages. 03-05-2020, 06:28 PM Chas863 : 942 posts, read 414,207 times Reputation: 3336. Answer to Which of the following could lead to demand- pull inflation ? Which of the following scenarios could lead to inflation? However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth. This could ultimately lead to a deceleration in economic growth. inflation targets, and at the economy’s monetisation rate. But once the effects of the pandemic begin to wane, there are fears in some quarters that the massive government spending could lead to inflation. After 1971, the instability of the short-run Phillips curve became more evident and the US economy was hit by several supply shocks, so the link between business cycles and inflation loosened. B ) An increase in the quantity of money . Who measures Inflation in India? As the pandemic of CoVid19 takes hold, will USA see Inflation or Deflation? What are some examples of high and low inflation? Of course, if the GDP falls by 15% we could see deflation and if it only falls by 5% we could see inflation. And, historically at least, wages tend to go up at about the same pace during periods of inflation. The Great Inflation of the 1970s, in truth, was a convergence of numerous factors, including years of bad economic policies, an oil embargo, and the untethering of the dollar to the gold standard. In these countries, the annual rate of inflation was significantly higher than the world averaged and in countries such as the UK and the USA where inflation is around 2 percent. If you're seeing this message, it means we're having trouble loading external resources on our website. So "price inflation" and "wage inflation" aren't exactly the same. Inflation is measured by a central government authority, which is in charge of adopting measures to ensure the smooth running of the economy. Our findings led us to ask whether rapid money supply growth would at least lead to moderate inflation. RAW Paste Data . lead for moneyover inflation(i.e., type 2 inflationpersistence) exists in the pre-Great Inflation years 1953–64, a period that Erceg and Levin characterize as without type 1 inflation persistence. The optimum inflation rate for long-term economic growth is between 2 and 4%. Moderate inflation can be differently defined around the world, given the different inflation histories. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. To analyze this, we defined moderate inflation as CPI increases of 2 percent or more for five consecutive years (this of course, also includes cases of high inflation, but for the purposes of this paper is simply labeled “moderate”). falls. If prices keep rising, we get what many economists and politicians dread – inflation. As an indication only, one could consider an inflation as moderate when it ranges from 5% to 25-30%. The inflation target would still hold, but … The authors find that "higher prices lead to higher wage growth". To analyze this, we defined moderate inflation as CPI increases of 2 percent or more for five consecutive years (this of course, also includes cases of high inflation, but for the purposes of this paper is simply labeled “moderate”). Previous question Next question Get more help from Chegg. Though moderate inflation is healthy for the economy, and therefore benefits most investment portfolios, an unanticipated jump in inflation above expected levels could have … RBI hiked interest rates by 350 basis points between March 2010 and October 2011 to tame inflation, which was above 9 per cent for most of last two years. Professor Richard Warr published the following article in The Conversation. Advantages of Inflation * Deflation is potentially very damaging to the economy and can lead to lower consumer spending and lower growth. This situation is not desirable because of the following reasons: No.1) real view the full answer. Low inflation can be characterized from 1-2% to 5%. Then, in the short run, unemployment . That would mean a confusing and uncertain outcome. c. A 0% inflation target could lead to deflation. A moderate increase in a budget deficit that leads to a _____ is not necessarily a cause for concern. I am thinking moderate Inflation, in durables. Food price inflation meanwhile increased to 2.4% in March, from 2% a month earlier. The Fed would now work harder to stamp out as much unemployment as it could and see where inflation landed. Public Pastes. Which of the following could lead to demand-pull inflation? In some cases, inflation targeting measured by credible entities may be self-fulfilling. In the following chart, we can see the FED’s “Total Assets” where we can see the three previous phases of Quantitative Easing (QE) where the FED massively increased the money supply to fight the deflationary forces on the 2008-2009 crash. Since inflation in many instances is a barometer for domestic demand pressures, one plausible reason for Bangladesh’s differential inflation performance could be that its economy has so far been impacted marginally by the global meltdown, in comparison to China and India. attempt on the part of the government to collect a given inflation tax revenue will bring forth an increase in the tax (inflation) rate; (iii) inflation might cause budget deficits to rise (revenues to fall) due to the Tanzi effect1, and the pursuing monetization could lead to even higher rates of inflation … There is no inflation ( price stability ) monetisation rate huge challenge for monetary policy will USA inflation! % ) pay off foreign debts unemployment in the 1970s to adjust its expectation of (! Pandemic of CoVid19 takes hold, will USA see inflation or deflation it means we 're having trouble external! And the 2018 target is some ten percentage points c. a 0 % inflation target, start! 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