Economic Presentation On Inflation

Table of Contents
What is Inflation?
Economic or Business Cycle.
Common way to measure inflation?
Frequencies or rates of inflation and its significance.
Types of inflation.
Case Example Of Real-Time Inflation Of Countries.
Advantages and Disadvantages
What Government do to stabilize prices?
What is Inflation?
In Economics, inflation refers to a general increase in the prices of goods and
services in an economy.
Inflation is a rise in prices, which can be translated as the decline of purchasing
power over time. The rate at which purchasing power drops can be reflected in the
average price increase of a basket of selected goods and services over some period of
time (Investopedia).
The Business Cycle
The economic or business cycle is
diagram that shows how GDP change
over a repeated cycle.
Trough= Recession/Recovery
Peak= Expansion/Economic Boom
Most of the time inflation starts
during or after an economic boom,
because aggregate demand increased
causing aggregate supply to decrease
and rise the prices of goods.
Common way to measure inflation?

The best way to measure inflation is through the use Consumer Price Index. A
consumer price index (CPI) is a price index, the price of a weighted average market
basket of consumer goods and services purchased by households. Changes in
measured CPI track changes in prices over time.
Frequencies or rates of inflation and its significance.
• Less than 4%- very mild inflation which can aid competitiveness.
• 4% to 10%- mild inflation which must be kept under control.
• 10% to 20%- inflationary pressures begin to build up. Strict policies are needed
to reduce it.
• 20% to 50%- serious inflation, people will start losing confidence in the value of
money.
• More than 50%- hyperinflation.
Types of inflation.
Case Example Of Real-Time Inflation.
• Hyper Inflation of Venezuela.
In 2014, the annual inflation rate reached 69%, the highest in the world. In 2015, the
inflation rate was 181%, again the highest in the world and the highest in the country's
history at the time. The rate reached 800% in 2016, over 4,000% in 2017, and about
1,700,000% in 2018, and reaching 2,000,000%, with Venezuela spiraling into
hyperinflation. (Wikipedia).
In April 2019, the International Monetary Fund estimated that inflation would reach
10,000,000% by the end of 2019.
The last estimation was for the year 2022, it stated that country rate f inflation has
decrease about 50% and it left the interval of hyperinflation. However, consequences
still afflicts the country and solution are still to be re-accommodate.
Cont.
If someone
wants to
understand to
which extent
inflation was
in Venezuela.
Cont.
Potential causes of the hyperinflation include heavy
money-printing and deficit spending and also when the
price of oil has decrease the President Maduros Nicolas
fail to adjust the policies which would decrease the rates
of inflation.
Advantages and Disadvantages
What Government do to stabilize prices?

1. Monetary policy – Higher interest rates reduce demand in the economy, leading to
lower economic growth and lower inflation.
2. Control of money supply – Monetarists argue there is a close link between the money
supply and inflation, therefore controlling money supply can control inflation.
3. Supply-side policies – policies to increase the competitiveness and efficiency of the
economy, putting downward pressure on long-term costs.
4. Fiscal policy – a higher rate of income tax could reduce spending, demand and
inflationary pressures.
5. Wage/price controls – trying to control wages and prices could, in theory, help to
reduce inflationary pressures. However, they are rarely used because they are not
usually effective.
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