Commodities such as oil,cigarettes and petrol rise due to inflation, may lead to peoples consumption decreasing which means less money coming into the country. Standard of living decreases.Inflation is a bad thing because it decreases competitiveness within different countries. This means that exports cost more abroad and it causes a decrease in the demand for exports. Currency devaluation may improve exports although the cost to produce these product may increase which still leaves us with inflation.
Gives the government more income .Big companies such as (Tesco’s) have the money to compete with the inflation rates where as small companies such as (family owned businesses) wouldn’t have the option to sell their produce for cheaper. This would lead to a monopoly of the market. Tourists from wealthier countries who would not be deterred from coming to Ireland will spend more money than previous years. Commodities (such as petrol, alcohol and cigarettes) are ,mainly targeted by inflation, this could lower the amount of people’s consumption. This would be good for the environment and personal health.
InflationBy Samantha Delamere &Ger Fylnn
Contents Four functions of money Monetary Policy Central Banks policy as lender of last resort Explanation of inflation, deflation & hyperinflation Negative outcomes of inflation Positive outcomes of inflation Recent inflation figures & goods that are driving inflation in Ireland
Four functions of money Medium of Exchange - trading and exchanging of goods that have monetary value Unit of Account – the comparison and value of goods(worth) Standard of Deferred payment – agreement of payment (based on credit) Store of Wealth – the fluctuation in price of a goods value. reference:http://www.preservearticles.com/201104115268/4-essential- functions-ofmoney.html DateAccessed:13/11/2011
Monetary Policy What Does Monetary Policy Mean? The actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves).Reference:http://www.investopedia.com/terms/m/monetarypolicy.asp#axzz1dtHuxPRD
Lender of Last ResortA Central Banks Function as “Lender of Last Resort” means that a country’s Central Bank offers loans to small commercial banks and other financial institutions, that are experiencing difficulty or near collapse. Reference: http://www.centralbanksguide.com/lender+of+last+res ort/
Inflation by inflation we mean a general rise in prices throughout the economy. Government policy here is to keep inflation both low and stable.(J.Sloman,2001, 2nd edition, PearsonEducation Limited. Essentials ofEconomics, pp.244-245)
Deflation This is where the Government deliberately curtails aggregate demand by either fiscal policy or monetary policy or both.(J.Sloman,2001, 2nd edition, PearsonEducation Limited. Essentials ofEconomics, pp. 452)
Hyperinflation The costs of inflation may be relatively mild if inflation is kept at single figures. They can be very serious, however, if inflation gets out of hand. If inflation develops into ‘hyperinflation’ with prices rising perhaps by several hundred per cent or even thousands per cent per year, the whole basis of the economy will be undermined.(J. Sloman, 2001, 2nd edition, Pearson EducationLimited. Essentials of Economics, pp.277)
Negative Outcomes Commodities Competitiveness with different countries Currency Devaluation
Positive Outcomes Government ++ Company Competitiveness Tourists Commodities (Environmentally aware)
Recent Inflation Figures Current Rate In October 2011 its is reported that the current rate of inflation in Ireland is at 2.85% Source1: http://www.tradingecono mics.com/ireland/inflation- cpi
Recent inflation figures The Consumer Price Index (CPI) is designed to measure the change in the average level of prices paid for consumer goods and services by all private households and foreign visitors to Ireland. The CPI is the official measure of inflation in Ireland. source2: http://www.citizensinformation.ie/en/consumer_affairs/consum er_protection/pricing/consumer_price_index.html
Goods that drive inflation herein Ireland Clothing & Footwear and Furnishings, Household Equipment &Routine Household Maintenance rose due to a recovery in prices following the traditional summer sales. Housing, Water, Electricity, Gas & Other Fuels rose due to an increase in the cost of electricity and higher mortgage interest repayments. Miscellaneous Goods & Services fell mainly due to a decrease in the cost of home insurance. Source3: http://www.cso.ie/releasespublications/documents/prices/current/cpi.pdf