The Effect of Inflation On Poor People in Hargeisa: Chapter One

THE EFFECT OF INFLATION ON POOR PEOPLE IN HARGEISA
CHAPTER ONE:
1.1 Introduction
1.1 .1Background
In economics inflation means, a rise in general level of prices of goods and service in an
economy over a period of time. When the general price level rises, each unit of currency buys
fewer goods and services. Thus, inflation results in loss of value of money. Another popular
way of looking at inflation is “too much money chasing too few goods”. The last definition
attributes the cause of inflation to monetary growth relative to the output availability of goods
and service in the economy.
Inflation is when the prices of most goods and services continue to creep upward. When this
happens, your standard of living falls. That's because each dollar buys less, so you have to
spend more to get the same goods and services. If inflation is mild, it can actually spur further
economic growth. If prices rise slowly and gradually, it can encourage people to buy now and
avoid future price increases. This increases demand, driving further economic growth. In this
way, a healthy economy can usually sustain a 2% inflation rate.
Inflation has changed the character of certain types of markets, encouraging standardized
products and limiting the marketing of highly specialized products. The public rates the
problem of inflation compared to other social problems and how this rating responds to the
actual state of the economy. Inflation brings to the measurement of the earnings of
corporations; they conclude that correction of the distortion actually raises corporate earnings.
Low-income housing is a resource provided for individuals and families needing help to
find reasonably priced housing that is safe, clean and comfortable. Low-income housing units
are located in a variety of areas, and some of the aid programs subsidize housing costs for any
home the recipients choose. Applying for low-income people is a fairly straight-forward
process after identifying a suitable area and housing development.
Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

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This essay in this volume is the discovery of the Inflation and reflects a dozen varied views on
one of the economic problems. My emphasis here is on finding of the causes of inflation and a
description of the effects of inflation on poor people in Hargeisa, not on specific policy
recommendations to end inflation. Many of us have views on what to do about inflation and
have not hesitated to speak up in public about those views, but my papers here are trying to
explain some of the economic and political processes involving inflation.
The rise in domestic prices of most food commodities is felt everywhere in Somaliland as
well as in most parts of the region. Indeed it is a global phenomenon. According to2007 report
by FAO, the average world food prices have risen by 36% per year in last decade. Generally
this has been painful for the majority of Somlilanders especially Hargeisa city inhabitants for
whom most of the food items are imported as well as the other people in the other regions of
the country.
People use dual currencies for transactions of goods and service. Although there is no fine
border line between the two, majorities of imported goods and merchandises are sold in
dollars or at least have dollar prices and so are some of the local services such as rents and
telecommunication services. But most domestic goods and many domestic services are
denominated in Somaliland shillings.
Price of the locally produced goods which are denominated in Somaliland shilling has been
going up in the same period. Commodities subject to high prices range from food items such
as maize, milk and meat. For example the price of one kilogram of meat was 15,000sh and
20,000sh in 2012-2013 respectively. Certainly the largest burden of the price rise is felt on the
poorest section both in rural and urban areas. For such communities it meant a considerable
decline in food security. Mustafa Ismail (2012)
The description of the dollar has his hard large section of the population who receive most or
part of their income from their relatives staying overseas. These people have lost about 40-
50% of their purchasing power to the higher food prices and dollar depreciation against other
currencies including Somaliland shilling. Mid-income labors which received their wages in

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dollars and exemplified by the staff of major businesses, who do not receive compensation for
the loss in real income have also suffered. Mustafa Ismail (2012)
Mean while the Somaliland shilling has gained recently against dollar from an average low of
7000 Somaliland shilling per dollar to an about 5200 per dollar during the past several years.
This can be on account of initial government plan of rising the value of Somaliland shilling
against in an effort to improve the purchasing power of the shilling and its store of value by
holding stocks of Somaliland and growth of the economy not matched by the growth in
money supply. Somaliland times (2003)
1.1.2 Problem Statement

Hargeisa is the largest city and also it is the capital city of Somaliland where most
transactions happen. Any effect of the economy almost will reach everyone of the society
whether poor or rich so when inflation occurs. Its burden is felt on the market and on the
community which makes them lose their purchasing power.
More over Hargeisa has been hit by inflation and high food prices that have especially hurt
the livelihood of the predominantly local inhabitants and pastoralist population. This thesis
research identifies the effects of inflation on the local low household’s income, and how it
affects the livelihood of community in Hargeisa.
1.1.3 Purpose of the study
The purpose of the study is to collect and analyze information about the effect of inflation on
poor people in Hargeisa by considering its impact on their household income and its affect
there daily live expenditure
1.1.4 General objectives of the Study

The general objective of this research is to investigate the effect of inflation on poor people in
Hargeisa.

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1.1.5 The specific objectives of the Study
 To determine how the inflation affects the society of Hargeisa economically.

 To determine the main causes of and consequences of inflation in Hargeisa.
 To find out the best way for controlling the inflation.
1.1.6 Research questions
 How inflation affects the society of Hargeisa economically?

 What are the main causes of and consequences of inflation in Hargeisa?
 What is the best way to controlling the inflation?
1.1.7: Scope of the study

This study will be carried out the selected poor people in Hargeisa, where the sample data
will be collect the researcher will expect to get full information ,the effect of inflation on poor
people income in Hargeisa. Finally, the scope of this research will be mainly the capital city
of Somaliland (Hargeisa). Somaliland(Hargeisa) and its districts to measure and to investigate
the effects of inflation on the society especially the poor people according to its effects on
income, employment, saving and investment.
1.2. Research methodology
1.2.1 over view +

This chapter presents the research methodology. It describes and justifies the methods and
processes that will be used in order to collect data that are used in answering the research
questions .The chapter is presented under the following sections namely: research design,
target population, sample size, and sampling technique, research instrument that is used in
data collection research procedure, validity and reliability, and data analysis.
1.2.2 Research design

The researcher will collect his/her analysis of data from some selected poor families in
Somaliland especially in Hargeisa. The researcher will use quantitative descriptive research

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to quantify incidences in order to describe current conditions and to investigate the effect of
poor accounting system on small business using information gained from the questionnaire.
The descriptive correlation quantitative design used to enable establish the relationship
between the independent and dependent variable through quantifiable results.
1.2.3Sample size
The research will carry out 20 questionnaires all together, which will be divided into two
respondent groups. The first grouped will the high incomes people and low income people to
know their difference according to the effects of inflation.
Thus the research will choose 20 persons as sample of the survey. Therefore non-probability
sampling method suits best and that why the researcher chose this method. To be more
specific the researcher used snow-bowling type of non-probability sampling. The research
variabled is categorical, especially nominal variable because they lack order. This kind of
survey sampling, snow-bowling, will be conducted by asking the respondents how inflation
affected their lives as hole.
1.2.4 Sampling procedure

Data analysis is designed to be mainly statistical based on questionnaires relevant to the topic.
The collection questionnaires help the researcher to analyze very well the data that collected
from different poor families. Farther more there will be conclusion and recommendation
about finishing and solution the problem that was, and recommending what the researcher
sees the solution.
1.2.5 Research instruments

When data is gathered it must be transformed to quantitative analysis. In the case of survey,
the raw observation is typically in the form of questionnaire with boxes checked.
The questionnaire will consist of close ended questions or fixed choice was chosen as my
primary type of several reasons, fixed choice questions get easy to make the respondents
quick decisions and easy answers.
They will help as a researcher to code the information easily for the analysis.

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I hope all of the respondents to complete the questionnaire for me to respond the questions in
a helpful and willing way, which will be one of the major successful of gathering my data.
I feel that they will be happy in supporting me with this study.
1.2.6 Data Analysis

This study will be used quantitative descriptive research that will conduct in primary data on
the collection of numerical mathematics in order to explain and predict these phenomena of
interest; data analysis is designed to statistical based on questionnaires relevant to the topic.
This method allowed researcher to get back all the questionnaires. The researcher must
explain any misunderstood questions on the pimple to get representative sample with less
error.
1.2.7 Ethical considerations

The researcher will provide the respondents with the necessary information as regards the
main purpose of the research, expected duration and procedures to be followed, and be in
position to keep privacy and not disclosure the confidentiality of respondents and researchers
responsibility.
1.2.8 Limitation of the study

Everything needs effort and preparation this means every step you take will have difficulties
and obstacles.
During the period of writing this research had faced many obstacles some of those obstacles
will be;
 Shortage of time, in reality the research is not a simple task; it needs a sufficient
amount of time it will be limit factor so that it will hardly to cover the entire topic
of the research in precise manner and way.
 Second limitation be discussed the most people perceive information as a secret
for their income information and might out not during; date collection
unwillingness of their expenditure will be questioned fraud and errors.
 Third limitation is sensitive of some respondents about the questionnaire.

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 Finally the obstacles that will meet during preparation of this research paper will
lack of reference books or earlier researches that will made to this topic, among
their activities
1.3: Structure of project paper

This paper has four chapters that are organized and arranged in systemic sequential
proceeding that are displayed in mean full and technically facilitated manner.
1.3.1. Chapter 1: introduction AND Research methodology

The first chapter contains an introductory narration which helps the reader to get a
comprehensive view of how paper is structures, the topic it addresses and pertinent
information containing in it. So this section will also highlight the following specific points,
background of the topic, statement of research problem, objectives of research, scope of the
research, significance of research, and the purpose of the study.
This part of the research also deals with the design that the research will have, methods of
conducting the research project include the method of data.
Collection, limitation and main obstacles of the study, and finally will have study from the
subject of the internal the effect of inflation on poor people in Hargeisa.
1.3.2. Chapter 2: literature review

This chapter illustrates what have been said this topic by earlier authors and researchers,
include the finding of multiple researchers who devoted their effort on this topic ,mainly in
this chapter will be focuses what will be said in this topic.
1.3.4: Analysis and discussions

This chapter is the new finding and the result of the respondents that have been studied. This
part of the paper will discuss and concentrate the primary outcome of the research and finally
the reader of this research project will capture the whole picture of this study in detail.

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1.3.4. Chapter 4: Recommendation, Conclusion, and Appendix

It is the fifth chapter and not last but last chapter of the paper, it examine in detail of the
conclusion drawn from research findings and the recommendations deemed pertinent to the
situation, it summarizes the reality of what has been discovered on the topic and should be
suggested as appreciate action to the situation as a results of this study
The final chapter of the research project will display the following points, Recommendation
of the findings, the conclusion of the research project, the aim of the study and its main
purpose, and eventually will highlight the answer of the statement of the research problem.

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Chapter two
2. Literature review
2.1 MEANING OF INFLATION
Meaning of inflation is clearly indicated different meaning. The word ((inflation" is most
emphatically no exception. therefore, have to consider alternative definitions.
Instead of a rise in the price level, inflation is often defined as an expansion in the monetary
circulation; more precisely, as an increase in the quantity of money times the velocity of
circulation of money, MV for short. To define it in terms of an increase in the quantity of
money, of M alone, would not be quite correct because it would overlook the possibility that
an increase in expenditures and prices might be due to an increase in Velocity alone. It is,
however, safe to say that there has never been a case in monetary history anywhere of a
prolonged and violent inflation without a sharp rise in the quantity of money. V is subject to
slow secular changes (as a rule in a downward direction) and to mild cyclical fluctuations
(usually upward during business cycle upswings and downward during business cycle
downswings). But large, rapid (though temporary) increases in V occur only during periods of
galloping inflation, which could never happen without sharp increases in M. source:
www.alison.com (2009).
The danger of inflation has let loose a veritable torrent of literature, ranging from highly
technical memoirs couched in mathematical and econometric terms to popular pamphlets.
Congressional committees alone have published a whole library of compendia and hearings
on the subject which contain, buried in mountains of trash and partisan statements, much
useful material and even original papers by leading experts. The flood of outpourings shows
no sign of receding.
In view of all this, it is hardly possible to say anything important that is both true and
heretofore unsaid. But it may be worthwhile to give a rounded picture and to emphasize
fundamental issues which seem in danger of being obscured by the great mass that has been
and is being written. That is the objective of the present study. It does not attempt to cover all

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fine points, even if they seem to hold greater intellectual challenge than basic facts and
principles which have been stated many times before. Source: www.Live mocha com (2001).
2.2 Inflation in Somaliland

2.2.1 Overview
Somaliland has been hit by inflation and high food prices that have especially hurt the
livelihoods of the predominantly pastoralist population unit a few months ago, Safia Jibril
was able to feed, clothe and educate her nine children thanks to the $100 that her
husband’s brother in the Diaspora sent every month.
Like many Somalilanders, Safia family has been hit by inflation and high food prices that have
especially hurt the livelihoods of the predominantly pastoralist population and created
general food shortage.
According to local traders, a sack of rice used to cost $28 two years ago, but this has
increased to above $52. The situation has been aggravated by the fact that Somaliland
imports virtually all its food. “We can no longer buy anything from the market because the
price of foodstuffs has increased” said Fatumo Ahmed, a mother of five children who used to
provide for her family by selling tomatoes in the town. Source: Dr. Ismail Ibrahim (2003).
Rising food prices can either or increase poverty, depending on how poor people earn their
income and how they spend it. For example, household those produce and sell food crops
will benefit from an increase in prices, unless they buy more food than they sell. In addition
to direct selling and buying of food, the poverty impact will also depend on how price
changes are transmitted through labor markets. For example, for example, if rising prices
lead farmers to expand production and hire more farm labor, landless farm workers may
benefit. Unskilled workers in urban area may also be affected. If food prices go down,
laborers from the countryside may search for work in nearby towns and cities, contributing
to the supply of labor and perhaps lowering waged. Rising priced might improve local
economies in rural areas in ways that benefits non-farming households, such as those if
small-scale traders and service providers, although their rising costs for food might outweigh
the benefits.
Source: world express east-Africa (2008)

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2.3: What Causes Inflation?

2.3.1: Demand-pull inflation
There are three causes of inflation. The first cause is called demand-pull inflation. This
occurs when demand for a good or service rises, but supply stays the same. Buyers become
willing to pay more to satisfy their demand. Demand-pull inflation can be accompanied
by irrational exuberance.
2.3.2: Cost-push inflation

The second cause is cost-push inflation. It starts when the supply of goods or services is
restricted for some reason, while demand stays the same. When the supply of labour is not
enough to meet demand, it can create wage inflation. In the past, inflation in prices generally
led to wage inflation, so that companies could retain good workers. However, competition
from technological alternatives (such as robotics) and lower-income countries means that
wages haven't kept up with prices. Higher prices combined with stagnant wages means your
standard of living has decreased. It's another reason for income inequality in the U.S.
2.3.3: Money supply

The third cause is overexpansion of the money supply plays a large role in inflationary
pressure as well. Monetarist economists believe that if the government does not control the
money supply adequately, it may actually grow at a rate faster than that of the potential output
in the economy, or real GDP. The belief is that this will drive up prices and hence, inflation.
Low interest rates correspond with high levels of money supply and allow for more
investment in big business and new ideas which eventually leads to unsustainable levels of
inflation as cheap money is available.
Inflation can artificially be created through a circular increase in wage earners demands and
then the subsequent increase in producer costs which will drive up the prices of their goods
and services. This will then translate back into higher prices for the wage earners or
consumers. As demands go higher from each side, inflation will continue to rise. Source:
http://afrik.news (2010)

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2.4: How Is Inflation Measured and Managed?

2.4.1: Measuring inflation
Inflation is usually estimated by calculating the inflation rate of a price index, usually the
Consumer Price Index. Taylor & Hall 1993;
The Consumer Price Index measures prices of a selection of goods and services purchased by
a "typical consumer."Mankiw 2002, pp. 22–32
The inflation rate is the percentage rate of change of a price index over time. Other widely
used price indices for calculating price inflation include the following:
2.4.2: Producer price indices (PPIs):
Produce price indices which measures average changes in prices received by domestic
producers for their output. This differs from the CPI in that price subsidization, profits, and
taxes may cause the amount received by the producer to differ from what the consumer paid.
There is also typically a delay between an increase in the PPI and any eventual increase in the
CPI. Producer price index measures the pressure being put on producers by the costs of their
raw materials. This could be "passed on" to consumers, or it could be absorbed by profits, or
offset by increasing productivity. In India and the United States, an earlier version of the PPI
was http://www.federalreserve.gov/Pubs/feds/2008/200838/200838pap.pdf.
2.4.3 Commodity price indices:
While episode of inflation in Malawi have tended to be largely triggered by foreign shocks,
domestic shocks have also played an important role, often amplifying the effects of external
factors. In particular, outbreaks of food inflation occurred in 1970s, 1980,1990s. food supply
shocks have provided a powerful impulse to inflation leading to a more exaggerated cycle in
inflation in the 1990s, one very simple way of demonstrating the effect of food supply shocks
on inflation is to examine the composition and structure of the CPI. Food prices dominate
movements in the CPI. That is , food prices contribute 55.5% to the consumer price index.
The key message therefore is that food supply shocks are a major source of inflationary
pressures in Malawi. Source: the effects of monetary policy in Malawi (2009).

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2.4.4: Core price indices:
Because food and oil prices can change quickly due to changes in supply and demand
conditions in the food and oil markets, it can be difficult to detect the long run trend in price
levels when those prices are included. Therefore most statistical agencies also report a
measure of 'core inflation', which removes the most volatile components (such as food and
oil) from a broad price index like the CPI. Because core inflation is less affected by short run
supply and demand conditions in specific markets, central banks rely on it to better measure
the inflationary impact of current monetary policy.
Other common measures of inflation are:
2.4.5: GDP deflator:
Is a measure of the price of all the goods and services included in Gross Domestic Product
(GDP). The US Commerce Department publishes a deflator series for US GDP, defined as its
nominal GDP measure divided by its real GDP measure. Kiley, Michael J. (2008)(PDF).
Estimating the common trend rate of inflation for consumer prices and excluding food and
energy prices
2.5: Effect of Inflation on Retirement Planning

The combination of inflation in some asset classes, and deflation in others, makes financial
planning more difficult. Rules of thumb no longer apply. One of the reasons government
economists didn't do more to head off the recession was because no one could believe that
housing prices could really fall.
Inflation is really bad for your planning because your target has to keep getting higher and
higher to pay for the same quality of life. In other words, your savings will buy less. As a
result, you will need to save more today to pay for higher priced goods and services in the
future. Since everything you buy today costs more, so you have less left-over income
available to save.

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2.6: Impact of Inflation on Treasury Bonds
Inflation is important if you are holding bonds or Treasury notes. These fixed price assets
only give a fixed interest each year. As inflation spirals faster than the return on these assets,
they become less valuable. As they become less valuable, people rush to sell them, further
depreciating their value. As their value becomes lower, the U.S. government is forced to offer
higher Treasury yields to sell them at all. This increases most mortgage interest rates.
This lowers the value of your investments. It also increases the cost to the Federal government
of financing the U.S. debt by raising the interest payments each year. The additional budget
expense needs to be offset by a cut in the discretionary budget, an increase in taxes, or further
deficit spending. All of those are contractionary fiscal policies, and will slow economic
growth. That translates into a lower standard of living for you. Article updated March 6, 2012.
2.7: How Does Inflation Impact for Life?

Inflation usually hurts your buying power. That's because rising prices means you have to
pay more for the same goods and services. Inflation can help you if you are the lucky
recipient of income inflation. You can also benefit from asset inflation, such as in housing
or stocks, if you own that asset before the price rises. However, if your income increases at a
slower rate than general inflation, you’re buying power declines even if you are making more.
Furthermore, many people can get hurt by an asset bubble if they try to time it, and buy right
when the bubble is about to burst. In general, inflation's main consequence is a subtle
reduction in your standard of living.
Inflation doesn't affect everything equally. Gas prices can double while your home loses
value. This is exactly what happened during the financial crisis of 2008. There
was deflation in home prices, which fell 31.8%. Meanwhile, inflation in oil prices, which
reached an all-time high of $148 a barrel. Since oil prices drive gas prices, this made the cost
of gas head for $5 a gallon. Driving to work became even more expensive, and stressful, at a
time when many workers were worried about even keeping their job.
Once the Federal Reserve started quantitative easing and the Federal government enacted
the economic stimulus plan to end the recession, investors grew worried about inflation. As a
result, they bought gold. This eventually drove the price of gold to an all-time record of

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$1,895 an ounce on September 5, 2011. In this instance, there was inflation in gold and oil
prices, with deflation in housing prices and personal income. Source: W. L. Freedman
(Cambridge: Cambridge University)
2.8: Effect of inflation

Most effect of inflation are negative, and can hurt individuals and companies alike, below is a
list of “negative” and “positive” effect on inflation
2.8.1: Negative effects are:

1) Hoarding (people will try to get rid of cash before it is devalued, by hoarding food and
other commodities creating shortages of the hoarded objects).
2) Distortion of relative prices (usually the prices of goods go higher, especially the prices of
commodities).
3) Increased risk- higher uncertainties (uncertainties in business always exist, but within
inflation risks are very high, because of the instability of prices).
4) Income diffusion effect (which is basically an operation of income redistribution).
5) Existing creditors will be hurt (because the value of the money they will receive form their
borrowers later will be lower than the money they gave before).
6) Fixed income recipients will be hurt (because while inflation increases, their income
doesn’t increase, and their fore their income will have less value over time).
7) Increased consumption ratio at the early stages of inflation (people will be consuming
more because money is more abundant and its value is not lowered yet).
8) Lowers national saving (when there is a high inflation, saving money would mean
watching your cash decrease in value day after day, so people tend to spend the cash on
something else).
9) Illusions of making profits (companies will think they were making profits while in reality
they’re losing money if they don’t take into consideration the inflation rate when
calculating profits).
10) Causes mal-investment (in inflation timed, the data given about an investment is often
deceptive and unreliable, therefore causing losses in investments).
11) Causes business cycled (many companies will have to go out of business because of the
losses they incurred from inflation and its effects).

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12) Currency debasement (which lowers the value of a currency, and sometimes cause a new
currency to be born).
13) Rising prices of imports (if the currency is debased, then it’s purchasing power in the
international market is lower). Source: http://www.investorguide.com/igu (2012).
2.8.2: Positive effect

1) It can benefit the inflators (those responsible for the inflation).
2) It is benefit early and first recipient of the inflated money (because the negative effects
of inflation are not there yet).
3) It can benefit the cartels (it benefits big cartels, destroys small sellers, and can cause
price control set by the cartels for their own benefits).
4) Many economists favour a low steady rate of inflation, low (as opposed to zero or
negative) inflation may reduce the severity of economic recessions by enabling the
labor market to adjust more quickly in a downturn, and reducing the risk that a
liquidity trap prevents monetary policy from stabilizing the economy. The task of
keeping the rate of inflation low and stable is usually given to monetary authorities.
Generally, these monetary authorities are the central banks that control the size of the
money supply through the setting of interest rates, through open market operations,
and through the setting of banking reserve requirements.
5) Toping effect argues that: a moderate level of inflation can increase investment in an
economy leading to faster growth or at least higher steady state level of income. This
is due to the fact that inflation lowers the return on monetary assets relative to real
assets, such as physical capital. To avoid inflation, investors would switch from
holding their assets as money (or a similar, susceptible to inflation, form) to investing
real capital projects. Source http://www.investorguide.com/igu (2012).
2.9: Relationship between inflation and unemployment

A connection between inflation and un -employment has been drawn since the emergence of a
large scale. Unemployment in the 19th century and connections continue to be drawn to day.
The unemployed serve as a reserve army of labor, which restrain wage inflation. In the 20 th
century, similar concepts in Keynesian economics include the NAIRU (non-accelerating rate
of unemployment) and the Philips curve.

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2.10: Rational expectation theory
Rational expectations theory holds that economic factors look rationally into the future when
trying to maximize their well-being, and do not respond solely to immediate opportunity costs
and pressures. In this view, while generally grounded in monetarism, future expectations and
strategies are important for inflation as well.
A core assertion of rational expectations theory is that actors will seek to "head off" central-
bank decisions by acting in ways that fulfill predictions of higher inflation. This means that
central banks must establish their credibility in fighting inflation, or economic actors will
make bets that the central bank will expand the money supply rapidly enough to prevent
recession, even at the expense of exacerbating inflation. Thus, if a central bank has a
reputation as being "soft" on inflation, when it announces a new policy of fighting inflation
with restrictive monetary growth economic agents will not believe that the policy will persist;
their inflationary expectations will remain high, and so will inflation. On the other hand, if the
central bank has a reputation of being "tough" on inflation, then such a policy announcement
will be believed and inflationary expectations will come down rapidly, thus allowing. Abel
and Bernanke. 2005, pp. 266–269
2.11: Austrian view
The Austrian School asserts that inflation is an increase in the money supply, rising prices are
merely consequences and this semantic difference is important in defining inflation. Austrians
stress that inflation affects prices in various degree, i.e. that prices rise more sharply in some
sectors than in other sectors of the economy. The reason for the disparity is that excess money
will be concentrated to certain sectors, such as housing, stocks or health care. Because of this
disparity, Austrians argue that the aggregate price level can be very misleading when
observing the effects of inflation. Austrian economists measure inflation by calculating the
growth of new units of money that are available for immediate use in exchange, that have
been created over time source: http://mises.org/story/908. Retrieved 2008-09-20.

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2.12: Theories of inflation

2.12.1 Keynesian view
Keynesian economic theory proposes that changes in money supply do not directly affect
prices, and this visible inflation is the result of pressures in the economy expressing
themselves in prices, the supply of money is a major, but not the only cause of inflation.
Source: Robert J. Gordon. (1988).
Keynesians blur the relationship between inflation and institutional process of setting prices
and on cost-push pressures as the underlying causes of the inflationary process.
NB: if an inflation theory focuses on the money supply and competitive markets, is it more
likely to be Keynesian theory or a classical theory?
The Keynesian theory of inflation holds that institutional and structural aspects of inflation, as
well as increases in the money supply, are important causes of inflation.
Keynesian theories emphasize institutional and social causes of inflation.
C.Colander David. (2006)
2.12.2 Monetarist view
Monetarists believe the most significant factor influencing inflation or deflation is how fast
the money supply grows or shrinks. they consider fiscal policy, or government spending and
taxation, as in effective in controlling inflation. Lagassé, Paul (2000).
2.12.3 The classical theory of inflation
Classical blur the price-setting process and the cost-push pressures on order to focus on
demand-pull pressure and the relationship between increases in money supply and inflation
the classical theory of inflation is summarized by the sentence: inflation is everywhere and
always a monetary phenomenon. C. Colader David (2nd edition) Pp.352.
2.12.4 Anti-classical or backing theory

Another issue associated with classical political economy is the anti-classical hypothesis of
money, or "backing theory". The backing theory argues that the assets and liabilities of the
issuing agency determine the value of money. Unlike the Quantity Theory of classical

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political economy, the backing theory argues that issuing authorities can issue money without
causing inflation so long as the money issuer has sufficient assets to cover redemptions. There
are very few backing theorists, making quantity theory the dominant theory explaining
inflation ‘‘work ding paper source: http://www.econ.ucla.edu/workingpapers/wp830.pdf.
2.13: Controlling inflation
A variety of methods has been used in attempts to control inflation.
2.13.1: Monetary policy

Today the primary tool for controlling inflation is monetary policy. Most central banks are
tasked with keeping the federal funds lending rate at a low level; normally to a target rate
around 2% to 3% per annum, and within a targeted low inflation range, somewhere from
about 2% to 6% per annum. A low positive inflation is usually targeted, as deflationary
conditions are seen as dangerous for the health of the economy.
There are a number of methods that have been suggested to control inflation. Central banks
such as the U.S. Federal Reserve can affect inflation to a significant extent through setting
interest rates and through other operations. High interest rates and slow growth of the money
supply are the traditional ways through which central banks fight or prevent inflation, though
they have different approaches. For instance, some follow a symmetrical inflation target while
others only control inflation when it rises above a target, whether express or implied.
Monetarists emphasize keeping the growth rate of money steady, and using monetary policy
to control inflation (increasing interest rates, slowing the rise in the money supply).
Keynesians emphasize reducing aggregate demand during economic expansions and
increasing demand during recessions to keep inflation stable. Control of aggregate demand
can be achieved using both monetary and fiscal policies Largesse, Paul (2000). New York:
Columbia University press (2001).
2.12.2: Fiscal policy
Fiscal policy through increase in public outlay and reduction in taxes leads to raise
national earnings, employment, productivity and prices. An increase in public outlay

Page 19
during deflation hikes the total demand for goods and services and tends to a large
increase in earnings via the multiplier process while a deduction in taxes has the effect
of raising disposable earnings thereby enhancing consumption and investment outlay
through of the people.
Outlay on public works creates demand for the products of private construction
industries and helps in bracing them whilst outlay on relief measures kindles the
demand for consumer goods industries. Deduction in such taxes as corporate profit
tax, income tax and excise taxes is likely to leave more earnings for expending and
investment. Borrowing by the administration to fund budget deficits utilises idle
money lying with banks and financial institutions for investment functions.
If the government believes that AD is too high, it may choose to ‘tighten fiscal policy’
by reducing its own spending on public and merit goods or welfare payments. Or it
can choose to raise direct taxes, leading to a reduction in real disposable income. The
consequence may be that demand and output are lower which has an effect on jobs and
real economic growth in the short-term. A fiscal tightening will have the effect of
reducing the size of the budget deficit.
2.13.3: Fixed exchange rates
Under a fixed exchange rate currency regime, a country's currency is tied in value to another
single currency or to a basket of other currencies (or sometimes to another measure of value,
such as gold). A fixed exchange rate is usually used to stabilize the value of a currency, vis-a-
vis the currency it is pegged to. It can also be used as a means to control inflation. However,
as the value of the reference currency rises and falls, so does the currency pegged to it. This
essentially means that the inflation rate in the fixed exchange rate country is determined by
the inflation rate of the country the currency is pegged to. In addition, a fixed exchange rate
prevents a government from using domestic monetary policy in order to achieve
macroeconomic stability. Friedman, Milton’s 1867-1960 (1963).
The Bretton Woods agreement, most countries around the world had currencies that were
fixed to the US dollar. This limited inflation in those countries, but also exposed them to the
danger of speculative attacks. After the Breton Woods agreement broke down in the early

Page 20
1970s, countries gradually turned to floating exchange rates. However, in the later part of the
20th century, some countries reverted to a fixed exchange rate as part of an attempt to control
inflation. This policy of using a fixed exchange rate to control inflation was used in many
countries in South America in the later part of the 20th century (e.g. Argentina.(1991-2002),
Bolivia, Brazil, and Chile)."Workingpapers"(PDF).
http://www.econ.ucla.edu/workingpapers/wp830.pdf.
2.13.4: Gold standard

Under a gold standard, paper notes are convertible into pre-set, fixed quantities of gold.
The gold standard is a monetary system in which a region's common media of exchange are
paper notes that are normally freely convertible into pre-set, fixed quantities of gold. The
standard specifies how the gold backing would be implemented, including the amount of
specie per currency unit. The currency itself has no innate value, but is accepted by traders
because it can be redeemed for the equivalent specie. A U.S. silver certificate, for example,
could be redeemed for an actual piece of silver.
The gold standard was partially abandoned via the international adoption of the Bretton
Woods System. Under this system all other major currencies were tied at fixed rates to the
dollar, which itself was tied to gold at the rate of $35 per ounce. The Bretton Woods system
broke down in 1971, causing most countries to switch to fiat money – money backed only by
the laws of the country.
Economies based on the gold standard rarely experience inflation above 2 percent annually
.Bordo, M. (2002) "Gold Standard" Concise Encyclopaedia of Economics.
Critics argue that this will cause arbitrary fluctuations in the inflation rate, and that monetary
policy would essentially be determined by gold miningwhich some believe contributed to the
GreatDepressionhttp://www.j-bradford delong.net Retrieved 2008-09-25.
2.13.5: Wage and price controls
Another method attempted in the past has been wage and price controls ("incomes policies").
Wage and price controls have been successful in wartime environments in combination with
rationing. However, their use in other contexts is far more mixed. Notable failures of their use

Page 21
include the 1972 imposition of wage and price controls by Richard Nixon. More examples
that are successful include the Prices and Incomes Accord in Australia and the Wassenaar
Agreement in the Netherlands.
In general wage and price controls are regarded as a temporary and exceptional measure, only
effective when coupled with policies designed to reduce the underlying causes of inflation
during the wage and price control regime, for example, winning the war being fought. They
often have perverse effects, due to the distorted signals they send to the market. Artificially
low prices often cause rationing and shortages and discourage future investment, resulting in
yet further shortages. The usual economic analysis is that any product or service that is under-
priced is over consumed. For example, if the official price of bread is too low, there will be
too little bread at official prices, along too unemployment little investment in bread making by
the market to satisfy future needs, thereby exacerbating the problem in the Temporary
controls may complement a recession as a way to fight inflation: the controls make the
recession more efficient as a way to fight inflation (reducing the need to increase), while the
recession prevents the kinds of distortions that controls cause when demand is high. However,
in general the advice of economists is not to impose price controls but to liberalize prices by
assuming that the economy will adjust and abandon unprofitable economic activity. The lower
activity will place fewer demands on whatever commodities were driving inflation, whether
labour or resources, and inflation will fall with total economic output. This often produces a
severe recession, as productive capacity is reallocated and is thus often very unpopular with
the people whose livelihoods are destroyed (see creative destruction). Source: Flanagan,
Tammy (2006-09-08).

Page 22
CHAPTER THREE
3. ANALYSIS AND FINDING
In this chapter the researcher discovered the finding of this research paper for the effects of
inflation on low income families in HARGEISA. In addition to this it also explored about
how to improve the standard of living of low income community in that area. Moreover, it
was undertaken to explain the reasons for inflation and determined the ways to control it.
Table 3.1: GENDER OF THE RESPONDENTS
Frequency Percent Valid Percent Cumulative Percent
Valid male 14 70.0 70.0 70.0
female 6 30.0 30.0 100.0
Total 20 100.0 100.0
According to this figure below, illustrates the gender of respondent in the field of work. This
indicates that 70%of the respondents were male and 30% out of the target respondents were
female. It also shows that most of the respondents in this category were male because it is
double of the female population in the target group.
30%
male
female
70%
Table 3.2 AGE OF THE RESPONDENTS

Page 23
Valid 15 to 20 1 5.0 5.0 5.0
21 to 25 9 45.0 45.0 50.0
26 to 30 8 40.0 40.0 90.0
30 above 2 10.0 10.0 100.0
Total 20 100.0 100.0
This Figure tells that 45% of the respondents were between ages of 21-25 years, 40% of the
respondents were between 26-30 years, 10% of the respondents were between ages above 30
and 5% of the respondents were between ages of 15-20. This indicates that the highest portion
of the age respondents between ages of 21-26 was 45%, were the smallest share was the
between ages of 15-20.
10% 5%
15 to 20
45% 21 to 25
40%
26 to 30
30 above
Table 3.3 Educational level of the respondent
Valid Below primary 1 5.0 5.0 5.0
secondary 1 5.0 5.0 10.0
university 18 90.0 90.0 100.0
Total 20 100.0 100.0

Page 24
This study shows that 90% of the respondents reply that their education level were in
university level and 5% of the respondents were in secondary school while 5% of the
respondents were below primary. This indicates that the highest portion of the respondents
were in university while the primary level is none.
5%
5%
Below primary
secondary
university
90%
Table 3.4 how many members of your family are employed
Valid 1 to 3 16 80.0 80.0 80.0
4 to 6 2 10.0 10.0 90.0
7 to 9 1 5.0 5.0 95.0
none 1 5.0 5.0 100.0
Total 20 100.0 100.0
This Figure illustrate that 80% of the respondents have 1-3 persons in their family employed,
10% of the respondents have 4-6 persons in their family employed, 5% of the respondents
have 7-9 persons in their family employed and 5% of the respondents have none in their

Page 25
family employed. This survey shows that the majority of households in Hargeisa have 1-3
persons in their family employed.
16
14
12
10
16
8
6
4
2 2 1 1
0
1 to 3 4 to 6 7 to 9 none
Table 3.5 how much in your monthly income
Cumulative
Frequency Percent Valid Percent Percent
Valid $50 to $150 3 15.0 15.0 15.0
$200 to $300 12 60.0 60.0 75.0
$300 to $500 5 25.0 25.0 100.0
Total 20 100.0 100.0
This study shows that 60% of the respondents their income are between $200-$300, 25% of the
respondents in their income is between $300-$500 and 15% of the respondents their income are
between $50-$150. This survey tells that the most of the respondents of income were $200-$300.

Page 26
12
10
8
12
6
4
5
2 3
0
$50 to $150 $200 to $300 $300 to $500
Table 3.6 do you have any other source income in addition to your salary
Valid yes 8 40.0 40.0 40.0
no 12 60.0 60.0 100.0
Total 20 100.0 100.0
The survey states that 60% of the respondents answered that they don’t get other source income in
additional salaries, 40% of the respondents answered that they get other source income in additional
salaries.
40%
yes
60%
no

Page 27
Table 3.7 how inflation affect your income
Cumulative
Valid less purchasing power 16 80.0 80.0 80.0
increasing purchasing power 3 15.0 15.0 95.0
no change 1 5.0 5.0 100.0
Total 20 100.0 100.0
According this figure , the survey shows that 80% of the respondents replied that the inflation
affect the income caused less purchasing power , 15% of the respondents replied that the
inflation affected the income caused increasing purchasing power and 5% of the respondents
replied the inflation did not affect income.
5%
15%
less purchasing power

increasing purchasing power
no change
80%
Table 3.8 average meals per day when inflation exist
Cumulative
Valid one time 4 20.0 20.0 20.0

Page 28
two time 3 15.0 15.0 35.0
three times 11 55.0 55.0 90.0
more than three times 2 10.0 10.0 100.0
Total 20 100.0 100.0
According this figure the survey that was carried out shows that 55% of the respondents
replied that the average meals per day when inflation occur is three times, 20% of the
respondents replied that the average meals per day is one time when inflation existed, 15% of
the respondents replied that the average meal per day is two times and 10% of the respondents
replies that the average meal per day is more than three times when inflation exist. So this
indicates the highest respondents replies that average meals are three times.
Commented [E1]: Comparing the table and the figure, there is

difference. Please correct.
one time
15% 55%
two time
65%
three times
20%
10% more then three times
Table 3.9 when inflation happens where do you get assistant and additional
income
Valid government 1 5.0 5.0 5.0
family 17 85.0 85.0 90.0
friends 1 5.0 5.0 95.0
others 1 5.0 5.0 100.0
Total 20 100.0 100.0

Page 29
According to this figure shows that 85% the respondents said when inflation happened they
get assistants and additional income their families, 5% the respondents said when inflation
happens they get assistance from the government, 5% get from friends while 5% get from
other sources.
18
16
14
12
10
17
8
6
4
2
1 1 1
0
government family friends others
Table3.10 what is the greatest impact of inflation in your life
Cumulative
Valid financial problem 14 70.0 70.0 70.0
social problem 3 15.0 15.0 85.0
stress 3 15.0 15.0 100.0
Total 20 100.0 100.0
The survey shows that 70% of the respondents answered the greatest impact of inflation in
their life was financial problem, 15% of the respondents answered the greatest impact of the
inflation was social problem and 15% of the respondents answered the inflation caused stress.
Page 30
15
10
14
5
3 3
0
financial problem social problem stress
Table 3.11 how inflation affect your sales
Valid reduce 18 90.0 90.0 90.0
increase 1 5.0 5.0 95.0
no change 1 5.0 5.0 100.0
Total 20 100.0 100.0
This study in this figure 90% the respondents replied that the inflation reduced their sales, 5%
of the respondents replied that inflation increased their sales and 5% of the respondents
replied that inflation has not affected their sales.
5%
5%
reduce
increase
no change
90%

Page 31
Table 3.12 what is the role of the government in controlling inflation
Valid little role 5 25.0 25.0 25.0
not at all 15 75.0 75.0 100.0
Total 20 100.0 100.0
According this figure 75% of the respondents answered the government is little role to control
the inflation, 25% of the respondents answered the government is not role to control the
inflation.
25%
little role
no at all
75%
Table 3.12 Do you think that unstable exchange rate have an effect on the increasing food
prices
Valid yes 20 100.0 100.0 100.0
This survey shows that 100% of the respondents said the exchange rate have affected on the
increasing the food prices on Hargeisa.

Page 32
yes
100%
Table 3.13 have your income increased during the last five
years
Cumulative
Valid yes 11 55.0 55.0 55.0
no 9 45.0 45.0 100.0
Total 20 100.0 100.0
According this figure 55% of the respondents replied that during last five years increased their
income, 45% of the respondents replied their incomes are not increased during last five years.
yes no
55% 45% 45%

Page 33
Table 3.15 did rising prices food affect you and your family
Valid yes 19 95.0 95.0 95.0
no 1 5.0 5.0 100.0
Total 20 100.0 100.0
According this figure shows that 95% of the respondents said the inflation affected the rising
of food and 5% of the respondents said that inflation is not affected the rising food price.
no 1
yes 19
0 5 10 15 20
Table 3.16 do you also save some proportion of your income
Valid yes 10 50.0 50.0 50.0
no 10 50.0 50.0 100.0
Total 20 100.0 100.0
This survey in this figure shows that 50% of the respondents do save some portion of their
and that is why the investment is low because the half of people does not save and 50% of the
respondents do not save some portion o their income.

Page 34
no
50% yes
50%
Table 3.17 when there is inflation the demand and consumption of the household
decreases
Valid agree 7 35.0 35.0 35.0
disagree 1 5.0 5.0 40.0
strongly agree 10 50.0 50.0 90.0
strongly disagree 2 10.0 10.0 100.0
Total 20 100.0 100.0
According this figure shows that 50% of the respondents strong agree with the researcher the
inflation decrease the demand and consumption of the house hold, 35% of the respondents
agree that inflation decreased the demand and consumption of the household, 10% of the
respondents strongly disagreed that the inflation is caused to decreased the demand and
consumption of the house hold and 5% of the respondents disagreed that the inflation caused
to decrease the demand and consumption of the household. This indicated the majority of the
respondents the inflation decreased the demand and consumption of the household.

Page 35
10
6 10
4 7
2 2
1
0
agree disagree strongly agree strongly disagree
Table 3.18 Year after year the prices of the necessary goods consumed in Somaliland
were increase, so who is responsible to this price increase
Valid our business 15 75.0 75.0 75.0
the ministry commerce 2 10.0 10.0 85.0
international problem 3 15.0 15.0 100.0
Total 20 100.0 100.0
According this figure shows that 75% of the respondents said our business are responsible
increasing of necessary goods consumed in Somaliland, 10% of the respondents said the
ministry commerce are responsible increasing of necessary goods consumed in Somaliland
and 15% of the respondents said it is international problem. This research indicated that our
business responsible the inflation.
15%
10%
our business
the ministry commerce
75%
international problem

Page 36
Table 3.19 which goods inflation affect severely
Valid durable 14 70.0 70.0 70.0
None durable 5 25.0 25.0 95.0
service 1 5.0 5.0 100.0
Total 20 100.0 100.0
According this figure 70% of the respondents replied durable goods affected inflation, 25% of
the respondents replied none durable goods affected the inflation and 5% of the respondents
replied service affected the inflation. The majority of respondents said durable goods affected
the inflation.
goods affect inflation

5%
25% Series2
70% Series1

Page 37
Chapter four
4. Conclusion and recommendation
4.1 conclusions
In this chapter, the researcher highlights some topics and areas of future research and key findings of
work. The goal of this research was to study the effects of inflation on poor people income in
Hargeisa city according to their incomes and their living standard.
The general problem of inflation has affected the different parts of the society, including
businesses, producers, consumers and many other aspects of the life, but the problem has
enormously affected households who are vulnerable to any kind of inflation since their
economic conditions are very low.
The analysis of data demonstrated that almost 60% of the respondents’ incomes are between
$200 and $300, which shows the majority of the population are trapped on poverty and apart
from their low incomes, inflation is present whereby sack of sugar costs up to $200 today and
the pricing are increasing day by day which makes their situation even worst.
Inflation decreases their purchasing power and as a result, the demand and consumption of
the households will decrease, the survey shows that 80% of the respondents replied that the
inflation affect the income caused less purchasing power this can create the markets to be
failure since there is no demand, supplies will also decrease.
As we explained in the analysis section we stated income and saving are both negatively
affected by inflation, although 50% of the respondents do save, but yet inflation decrease the
purchasing power of the community and they have to reduce their saving, which implies that
even if their incomes increases the people ability to save remain same. Because the largest
proportion of the income is spend on basics goods and food.
From the finds, we conclude that more than 40% of the respondents have other sources of
income like Diaspora and also their incomes have increased during the last years. 60% of the
respondents have been engaged in micro finance activities in order to increase their incomes

Page 38
because it plays significance role in poverty reduction, schooling business development and
promoting socioeconomic wellbeing.
Another impact of inflation that was found be important is the inflation affected the durable
goods, it can be interpreted that inflation affects the durable goods since 70% of the
respondents illustrate that inflation leads durable goods and hence affects the lives of
everyone directly or indirectly. We have assessed that inflation increases poverty because the
low income people are mainly civil servants whose their incomes are fixed and when food
prices increase there is a reduction in the amount they used to purchase before and it leads to
malnutrition.
Finally, we conclude the Somaliland government should play an important role in controlling
inflation by making the central band more effectively and also by using effective monetary
system and also do frequent research to know the present the socio economic condition of the
poor people.
5.2 Recommendation:
After, a data analysis the researcher was able to accomplish the purpose of this study:
therefore, the following recommendations are suggested by the study.
 The living standard of Somaliland households is very low, so the government should
aware the prices of the necessary goods consumed in Somaliland to satisfy the needs
of the households.
 Our businessmen should not focus on only their profit, but they should be very kind to
their society and decrease the prices of the essential goods, or there should not be a
huge profit for the necessary goods consumed in Somaliland.
 The government should do participatory research is required to gain adequate
understanding of the poor and vulnerable families and members of the population.
 The government should initiate the banking sector which will facilitate the financial
transactions like savings, credit, and micro and macro loans to start investing locally.
 The ministry of commerce should aware and intervene the prices of the essential
goods consumed in the country, and have clear policies towards the trading system of
Somaliland.

Page 39
 Stabilizing exchange rate to reduce the effects of unstable exchange rate and also to
reduce its effect on the community hole.
 The central bank of Somaliland should play an important role by controlling inflation
 In the coming future, the government must put a subsidy for inflation sensitive goods.
 When there is inflation the government should increase the salaries of its employee to
recover the losing purchasing power
 The government should encourage our local products, and discourage importing
goods, in order to escape inflation.
 Reduction of taxes on food to reduce hunger between the low income people and
micro finance programs should be exposed to promote a modernized savings to the
poor clients which will contribute to an improvement of the quality of their lives. And
it serves to capitalize on the productive activities, which sustain the family and thereby
enhancing income of the family.

Page 40

The Effect of Inflation On Poor People in Hargeisa: Chapter One

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The Effect of Inflation On Poor People in Hargeisa: Chapter One

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THE EFFECT OF INFLATION ON POOR PEOPLE IN HARGEISA

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

1.1.2 Problem Statement

1.1.3 Purpose of the study

1.1.4 General objectives of the Study

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

1.1.5 The specific objectives of the Study

 To determine how the inflation affects the society of Hargeisa economically.

1.1.6 Research questions

 How inflation affects the society of Hargeisa economically?

1.1.7: Scope of the study

1.2. Research methodology

1.2.1 over view +

1.2.2 Research design

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

1.2.4 Sampling procedure

1.2.5 Research instruments

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

I feel that they will be happy in supporting me with this study.

1.2.6 Data Analysis

1.2.7 Ethical considerations

1.2.8 Limitation of the study

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

1.3: Structure of project paper

1.3.1. Chapter 1: introduction AND Research methodology

1.3.2. Chapter 2: literature review

1.3.4: Analysis and discussions

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

1.3.4. Chapter 4: Recommendation, Conclusion, and Appendix

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

2.2 Inflation in Somaliland

Source: world express east-Africa (2008)

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

2.3: What Causes Inflation?

2.3.2: Cost-push inflation

2.3.3: Money supply

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

2.4: How Is Inflation Measured and Managed?

2.4.2: Producer price indices (PPIs):

2.4.3 Commodity price indices:

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

2.4.4: Core price indices:

Other common measures of inflation are:

2.4.5: GDP deflator:

2.5: Effect of Inflation on Retirement Planning

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

2.6: Impact of Inflation on Treasury Bonds

2.7: How Does Inflation Impact for Life?

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

2.8: Effect of inflation

2.8.1: Negative effects are:

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

2.8.2: Positive effect

2.9: Relationship between inflation and unemployment

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

2.10: Rational expectation theory

2.11: Austrian view

Author: Hussein Sitiin Farah (BA of econ) at university of Hargeisa

2.12: Theories of inflation

Keynesian theories emphasize institutional and social causes of inflation.