Category: Economic System

Economics is a social science that studies how individuals, businesses, governments, and societies decide how to allocate resources to meet their needs and wants. It is a fundamental part of our daily lives and affects every aspect of society, from our personal finances to the policies and decisions made by governments and businesses.

Basic Concepts in Economics

In economics, the concept of scarcity is essential because resources are limited, and choices must be made about how to allocate them. In this sense, a government may choose to spend money on education or healthcare, because it can’t fund both at once. This is a reality for everyone – there’s only so much time in the day. When your schedule gets busy, it’s natural to feel that you just don’t have enough time to do everything you want to do. But when you look at your calendar, are you really making the best use of your free time? Or could you be more effective with some changes?

The supply and demand relationship is one of the fundamental principles in economics. It relates the availability of a product or service to the need or want for it. If there is more demand than supply, prices tend to rise, while a surplus of supply can cause prices to drop. Price isn’t just about the monetary value – it’s also a reflection of how valuable people find something. Price changes can act as an indicator of changes in people’s wants and needs.

Theories

The fundamental idea behind economics is the relationship between supply and demand – how price changes will affect how much of a good or service is supplied. Inflation, unemployment, and economic growth are some phenomena that can be explained with this simple concept. When prices go up, more of a good or service is supplied; when they go down, less is supplied. By understanding the intricacies of supply and demand, economists can better understand how economies work and make predictions on future outcomes.

Resources

In economics, resources are the inputs used to produce goods or services. They include capital goods (the machinery used to make goods), natural resources (the raw materials used), labor (the people who use their skills to produce things), and human capital (the knowledge that people have gained in order to be productive). The key takeaway here is that resources are anything that can be used in the production process: machines, people, and even land/natural resources.

Different Ways

Economics is a field that has been studied for centuries, and as it turns out, there are many different ways to approach the subject: microeconomics focuses on individual consumers and businesses, while macroeconomics looks at the economy as a whole. Economic models such as the circular flow model and the production possibilities frontier help us understand how resources are allocated and how economies grow over time.

Usage in Real Life

Economists and policy-makers often use the language of microeconomics to study how individuals and companies make decisions about their own behavior, as opposed to how governments would try to influence them. For example, if a government were trying to decide whether to subsidize a particular industry through lower taxes, it would be helpful to know how much that industry contributes in taxes, what taxes are being used for, whether lower taxes would lead to higher profits or more employment, and so on.

The most basic microeconomic analysis involves supply and demand. Economists use graphs showing the relationship between supply and demand to study market trends. They also monitor economic indicators like unemployment rates, interest rates, and gross domestic product, which help paint a picture of the current state of the economy and its future outlook.

Connected With Other Sciences

Economics is closely linked to other social sciences, such as sociology, political science, and psychology. For example, economists may study the impact of social norms on economic behavior, or the ways in which political decisions affect economic outcomes. In fact, many undergraduate economics courses are taught by faculty from other disciplines.

Economics is also closely related to business, finance, and public policy. Many economists work for government agencies like the Federal Reserve System or the U.S. Bureau of Labor Statistics or in private sector business such as banks or consulting firms. Others work at universities or research institutions like the Brookings Institution or the American Enterprise Institute.

Some economists specialize in specific topics, such as international trade or monetary policy; others may focus on specific regions, countries, or industries. For example, macroeconomists study broad economic trends across countries, while microeconomists focus on individual markets within countries (such as labor markets).

Conclusion

In conclusion, the field of economics has many different aspects and applications. Economics is generally considered a social science, but it also draws from the fields of mathematics, statistics, psychology, and sociology. The main goal of economics is to understand how societies use resources, allocate goods and services, and function as an economic system.

Therefore, economics provides us with the tools to make informed decisions about our personal finances, as well as to make policy decisions that can improve the welfare of society as a whole. Whether we are students, business owners, or policymakers, a basic understanding of economics is essential today.

I thoroughly believe I encompass a strong, representative example of the free enterprise spirit. The free enterprise economy adequately provides me with opportunities for involvement in work and the community. Free enterprise is private resources owned, and competitiveness will thrive economically with minimal government intervention. In many respects, I value my personal freedom from the choices I make in the economy to the choices I make in the election. The possible rewards of a free enterprise in many respects provide me with opportunities and involvement that directly impact the community I live in. Freedom is something I appreciate daily. Plenty of the decisions I invariably end up making, from the particular food I purchase to the decisions I create in my work, are impacted by free enterprise. Even more significantly, without free enterprise, my university degree would be unachievable. Everywhere in my life, I am exposed constantly to a broad variety of valuable goods. These goods can be endless with types, colors, and sizes, merely depending on the type of commodity. Without free enterprise building competitive markets, I would never be exposed to such a variety of goods. Not only that, heavy rivalry between businesses influences the buyer’s market. The competition takes the form of quality products and typically lower prices, which are both of enormous benefit to me in my investment decisions.

I have life goals; there are ambitions even for businesses and governments. We all embrace goals in our free enterprise system. What I personally ponder the vital economic and social goals should be environmental and economic equity. I undoubtedly find economic equality to be extremely essential for me because, in daily existence, a well-established tradition of justice, impartiality, and fairness must be essential. Sincerely, with equivalent work, I believe in fair pay. I could never discriminate based on age, sex, ethnicity, faith, or impairment at work or in my private life as a whole. As cultures of societies shift, I can foresee that not only I, but more people will consider a more sustainable environment to represent an important goal within free enterprise. Essentially, ultimately, we remain the ones deciding on the most meaningful goals for us. Our goals and objectives may promptly change in the near future.

Unmistakably, under a free enterprise system, I am divinely inspired, I have the opportunity to acquire prosperity on the grounds of my own diligent work and capability. The whole spirit of free enterprise fosters my self-confidence, inspiration, pride, and fierce joy. This gently encourages me to maximize my ability to do much more and be more self-sufficient. Such economic freedom remains a buoyant force that allows me a major say in my personal life. In my personal and professional life, I can conclude I have witnesses, peers, and colleagues able to work hard and prosper under free enterprise. We are all able to make a contribution to a booming and dynamic economy.

1 Background of the study

Macroeconomic stability is a fundamental macroeconomic policy objective of every country, whether developed or developing (Frimpong & Oteng-Abayie, 2010; Agalega & Acheampong, 2013). This has made the study of the relationship between inflation and economic growth of interest to economists for a long period of time (Khan, 2014). The primary objective of such studies has been to identify robust evidence of the sign of this relationship and its stability over time (Khan, 2014). Nonetheless, such theoretical and empirical studies have often yielded diverse conclusions regarding the direction of the impact of inflation on economic growth (Frimpong & Oteng-Abayie, 2010 ).

Key macroeconomic factors such as interest rate, exchange rate, and price stability (inflation rate) affect the economic performance of every nation, making price stability a major monetary policy objective in almost every country (Anidiobu, Okolie, & Oleka, 2018). Due to the vital role macroeconomic variables such as interest rates, inflation, and exchange rates play in the economic performance of a country, monetary and fiscal policies in Ghana have often aimed at sustaining high economic growth rates amidst low inflation or price stability. (Frimpong & Oteng-Abayie, 2010; Agalega & Acheampong, 2013). Although Ghana has been targeting a single-digit average inflation rate (Agalega & Acheampong, 2013), the country is still battling to overcome the persistent year-to-year increase in inflation, and also its causes and consequences (Anafo, Kweku, & Naatu, 2014). The inflation rate in Ghana had risen over the past few years and is still rising. In the month of September 2011, inflation in Ghana was 8.40% and in the month of November 2013, it had risen to 13.20%.

Zou et al. (2011) opine that inflation is a major cause of social and economic instability. Considered the most observed and tested economic variable theoretically and empirically (Farid et al, 2012), inflation is the major problem of most economies and exerts diverse influences on the economic growth of every country (Anafo, Kweku, & Naatu, 2014). Comment by Maison, Isaac: From Anafo, Kweku, & Naatu, 2014 Comment by Maison, Isaac: from Anafo, Kweku, & Naatu, 2014

Inflation, defined as the general increase in the level of prices of goods and services in an economy over a period of time, reduces the purchasing power of people, making it deleterious to economic growth (Anafo, Kweku, & Naatu, 2014). Thus, whereas Fischer (1993) concludes that inflation is not good for the longer-term growth of an economy, Barro (1996) opines that price stability is a central pillar of economic growth. ). The effects of inflation on economic growth in developing countries are thus of much interest (Gillman & Harris, 2009). However, theoretical and empirical studies on the inflation-economic growth nexus have been inconclusive and controversial. (Idris and Bakar, 2017; Majumder, 2016). While some posit a negative relationship (Fisher, 1993 and Barro, 1995), others conclude a positive relationship (Mallik and Chowdhury, 2001) with some unable to establish any relationship (Sidrauski, 1967). This has resulted in a knowledge gap regarding the relationship between inflation and economic growth. (Adusei, 2012). These diverse findings call for further research in the field. An answer to this question will therefore go a long way in guiding policymakers in choosing appropriate inflation targets to improve the macroeconomic management of Ghana’s economy (Frimpong & Oteng-Abayie, 2010).

2 Problem of the statement

This study is to determine the major macroeconomic causes of inflation and its effect on the economic growth of Ghana. Majumder (2016) opines that the question today is not only about the simple relationship between inflation and economic growth but also the level of inflation that can affect economic growth. Thus, recent empirical studies on inflation-growth nexus have sought to determine the threshold level above which inflation hurts economic growth (Adusei, 2012).). The question regarding the threshold level above which inflation harms the economy is thus empirically unanswered (Frimpong & Oteng-Abayie, 2010). There is however no consensus on the actual threshold level for Ghana (Ayisi, 2013).With most empirical studies in Ghana suggesting that inflation begins to hurt growth when it exceeds the single-digit threshold level (Adusei, 2012), monetary and fiscal policies have aimed at reducing inflation to single digits. (Ayisi, 2013). However, these studies have reported different threshold levels (Frimpong and Oteng-Abayie, 2010; Munir and Mansur, 2009; Hussain, 2005; Burdekin et al., 2004; Gillman et al. 2002; Khan and Senhadji, 2001; Ghosh and Phillips, 1998; Bruno and Easterly, 1998; Sarel, 1996; Fischer, 1993.

Although empirical results have posited non-linear effects of inflation on economic growth in developed countries, the effects of inflation on developing countries are less clear (Gillman & Harris, 2009). Also, cross-country panel studies have dominated existing empirical literature on the threshold effect of inflation on economic growth. Because factors pertaining to different countries are heterogeneous, country-specific studies need to be conducted to provide specific evidence relevant to the country under study (Frimpong & Oteng-Abayie, 2010 ). Comment by Ettandoh: the topic should be ‘the relationship between inflation and economic growth and the acceptable threshold that will positively affect economic growth

Finally, existing studies in Ghana have overly dwelt on the effects of inflation on the economy (Frimpong & Oteng-Abayie, 2010; Agalega & Acheampong, 2013; Adusei, 2012; Ayisi, 2013) without delving much into the causes of inflation in Ghana.

3. Objectives of the study

Comment by Ettandoh: objectives of the study: The relationship between inflation and economic growth (long run and short run)To determine the threshold level of inflation that hurts the economic growth of Ghana.

The main goal of the study is to examine the macroeconomic causes of inflation and its effects on Ghana’s economic growth. The study intends to achieve the following specific objectives:

1. To determine the major cause of inflation in Ghana.
2. To examine any long-run relationship between inflation and economic growth in Ghana.
3. To examine any short-run relationship between inflation and economic growth in Ghana.
4. To determine the threshold level of inflation that hurts economic growth in Ghana.

4 Hypothesis

Following the abovementioned objectives, the study will test the following hypotheses:

• HO4: There is a causal relationship between inflation and exchange rate, interest rate, government spending, and economic growth.
  • HA4: There is no causal relationship between inflation and exchange rate, interest rate, government spending, and economic growth.
• HO1: There is a significant long-run relationship between inflation and economic growth in Ghana.
  • HA1: There is no significant long-run relationship between inflation and economic growth in Ghana.
• HO2: There is a significant short-run relationship between inflation and economic growth in Ghana.
  • HA2: There is no significant short-run relationship between inflation and economic growth in Ghana.
• HO3: There is a threshold level beyond which inflation hurts economic growth in Ghana.
  • HA3: There is no threshold level beyond which inflation hurts economic growth in Ghana.

5 Significance of the Study

This research will benefit policymakers, academics, and other stakeholders like investors and economic/financial analysts. The study will examine the causes of inflation in Ghana. It will also assess the effects of inflation in Ghana and determine the threshold level beyond which inflation hurts Ghana’s economy. The question regarding the threshold level above which inflation harms the economy is empirically unanswered and an answer to this question will go a long way in guiding policymakers in choosing appropriate inflation targets to improve the macroeconomic management of Ghana’s economy (Frimpong & Oteng-Abayie, 2010). Thus, the study will assist policymakers in inflation targeting and offer them vital information needed to make inflation-targeting policies and predictions that will help Ghana achieve a desirable inflation rate needed to stimulate economic growth in Ghana. This is very important considering the efforts/resolves of the current Ghana government to curb inflation, achieve price stability, and sustained economic growth. Sowa (1994) opines that the macroeconomic conditions of Ghana are similar to that of most sub-Saharan African countries. Thus, the findings of this research will not only benefit Ghana’s policymakers but will also be of benefit to policymakers in other sub-Saharan African countries.

To academia, this research will add to current knowledge on the effect of inflation on Ghana’s economy. While inflation remains a persistent problem in most developing countries (Barro, 1995), making the effects of inflation on economic growth in developing countries of much interest (Gillman & Harris, 2009), the effects of inflation on developing countries are less clear (Gillman & Harris, 2009). Theoretical and empirical studies on the inflation-economic growth nexus have been inconclusive and controversial (Idris and Bakar, 2017; Majumder, 2016) (Fisher, 1993 and Barro, 1995), (Mallik and Chowdhury, 2001) (Sidrauski, 1967). These diverse findings call for further research in the field. Comment by Maison, Isaac: from (Majumder, 2016).

Also, Majumder (2016) opines that the question today is not only about the simple relationship between inflation and economic growth but also the level of inflation that can affect economic growth. while recent empirical studies on inflation-growth nexus have sought to determine the threshold level above which inflation hurts economic growth (Adusei, 2012), there is no consensus on the actual threshold level for Ghana (Ayisi, 2013; Frimpong and Oteng-Abayie, 2010). The question regarding the threshold level above which inflation harms the economy is thus empirically unanswered (Frimpong & Oteng-Abayie, 2010) and this paper will contribute to answering that question.

6 Scope and Limitations of the Study

The study will use GDP growth as a proxy for economic growth, in line with extant research (Oteng et al., 2016; Alhasan and Fiador, 2014). Although, economic growth has been conventionally measured as the percentage change in real gross domestic product (Oteng et al., 2016), Ivković (2016) argues that the measurement of GDP is affected by black market/informal transactions and poor record keeping. The GDP for Ghana will thus be affected by these factors. It is hoped that improved record keeping in the future and digitization of the Ghanaian economy will yield improved GDP measurements.

The study also uses inflation as an independent variable. Although inflation is available in monthly, quarterly, and yearly frequencies, this work will be restricted to the use of yearly data because it includes control variables such as FDI and labor, which are available only in yearly frequency. The use of monthly or quarterly data is thus restricted in this study. Future studies can explore other variables that will make the use of quarterly or monthly data possible.

7 Methodology

The study will employ the VAR/VECM techniques and use annual time series data from 1975 to 2018.

The study will use economic growth as the dependent variable while inflation will be the dependent variable. Labor, capital, trade openness, exchange rate, government expenditure, interest rate, and foreign direct investment will be used as control variables. Extant research has used variables such as real GDP growth as a proxy for economic growth (Oteng et al., 2016; Alhasan and Fiador, 2014). In line with these extant works, economic growth will be computed as, where Y represents economic growth, and is the real GDP at the time (t) while in the prior year’s GDP.

The first step will be to test the order of integration of the variables and to ensure that the variables are of order I(1). After the unit root test, the Johansen cointegration test will be performed to ensure that the variables move in a long-run relationship. The inflation rate will then be normalized in a vector autoregressive (VAR) model to determine the short-run and long-run causes of inflation. The VAR variance decomposition will be employed to determine the proportion of the movements in inflation rate that are due to “own” shocks, and the changes in inflation emanating from shocks to the other variables.

The VECM will then be used to determine the short-run and long-run effects of inflation on economic growth in Ghana. Following Begum, et. al (2015), Mwinlaaru and Ofori (2017), and Frimpong and Oteng-Abayie (2006), this work will adopt the Solow growth model/Cobb-Douglas production function, which is generally stated as: where Y represents economic or GDP growth, K represents capital, and A represents total factor productivity (the GDP growth attributable to other factors of production aside capital and labor). The following explanatory variables are added to derive the growth function: trade openness, exchange rate, government spending, interest rate, and foreign direct investment. The nonlinear effects of inflation on economic growth are considered by including the quadratic form of inflation and the basic equation is stated below:

Where Y represents economic/GDP growth, INF represents inflation, INFS is the quadratic form of inflation, L is labor, K represents capital, TRP is trade openness, GEX is government spending, ER represents exchange rate, FDI is foreign direct investment, INT is the nominal interest rate. is a constant, is the coefficient of the respective variables, is the time period while is the error term,

Following Begum et al. (2015), the Lind and Mehlum (2010) U test will be used to determine the threshold level beyond which inflation hurts the Ghanaian economy. The Lind-Mehlum U test will also determine whether the relationship between inflation and economic growth is u-shaped or inverse u-shaped.

8 Organisation of the study

This study is organized into five chapters. Chapter one, the introductory chapter, will discuss the background of the study, state the research problem and objectives, develop the hypothesis, and give the scope and limitations of the study. Chapter two will entail the theoretical and empirical literature review on the topic. The theoretical literature review will present the theories on inflation-economic growth nexus while the empirical literature review will discuss the empirical findings of other works on the topic. The third chapter will present the methodology adopted for the study. It will present the models for the study and discuss the detailed research methodology for the study. Chapter four will present the results of the study and analyze the results. The final chapter will present a summary of the work, state the main research findings, draw conclusions, and make relevant recommendations. It will also make suggestions for further studies.

Implement soccer industries in Guayaquil

Soccer as always has a lot of earnings to the country, but know the economy of Ecuador has a decline. Direct Tv, Tv cable, Fox sports and Teleamazonas are interested in Ecuador televisión rights. Direct tv and Tv cable have offered four hundred thirty-two million dolars, Fox sports and Teleamazones have offered three hundred two dollars to broadcast the ecuadorian championship. This kind of offers are popular around the world.

Guayaquil takes many examples of european countries, in germany people relfex about two important points. First to explain that a team and a league is like a company and make up a bussiness system, that is why their success depends on the model of bussiness they use. Second people watch that soccer turned into and international economic system that is conected with every country around the world.

The european system is an inspiration to other countries. This system was created by Joseph A. Schumpeter minister of finance in Austria and teacher of hardvare said that soccer is distinguished because it is innovative, look for constant changes and try to break structures that can´t let a Company position above their competition.

In Europe the system begins with the training of soccer players in a young age in soccer schools with a multi-disciplinary character, institutionally leagues and soccer teams have a high level of organization, proffessionalism and planeation that let the develop of this tournaments.

Mexico follows a different scheme of business, Mexico has the central objective to make short-term profits, this justify the existance of short tournaments, a short league, constantly soccer players are sold to european countries and a high rotation of template of soccer players and technical body.

Ecuador took this two models to made their soccer system. In Ecuador there are many soccer academys that help soccer players with talent and a Young age are trained in soccer schools to have the tools that would help them to have an opportunitie to become proffessional.

In Guayaquil are the best soccer teams in the country includings Barcelona, Emelec and Guayaquil City, in this time when children turned to teenagers, they have the opportunitie to prove their abilities in one of the teams in Guayaquil, this help them to start their carreer as proffessional soccer players demostrating their talent to the coaches that watch them in soccer matches.

In Guayaquil the system is a combination of these two models. Guayaquil take the european system to teach Young players the tools to become soccer players as they have an organized system of tournaments and the league called “Liga Pro”, but they combined with the mexican system in the way to create a short tournament called “copa Ecuador” and the constantly sold of soccer players to mexico, Brasil, Colombia or argentina, a high rotation of the technical body, this two methods help to increase the earnings to the city, but there is a problema of corruption in Guayaquil and in all the country too.

Soccer without Corruption

Corruption has existed in the last years, but know has increased because more people are interested only in the economic earnings. From their president of the soccer federation of Ecuador to the brave bars of the teams of Barcelona and Emelec stain the name of soccer in Ecuador. Corruption appears from human trafficking in a high level of young soccer players to the brave bars that believe they are the owners of the stadium, even certain leaders that practice corruption are in jail paying cutodial sentences. (Appendix 1, Picture 2)

Another type of corruption is the dialogue between the coaches of diferent soccer teams about the payment of soccer matches before the result is given. A coach of Macará told to the press that he spoke with the coach of El Nacional and stablished an agreement to give them a win or a draw, the payment depends on the final result, the coach of El Nacional talked wit the goalkeeper and the lateral to let the other team make the goal, so they would receive a percentage of the money that the team would give to the coach.

On the other side the president of the federation os soccer in Ecuador Carlos Villacís said that the federation needs to put a stop to the corruption of soccer in Ecuador, he said that the federation needs an extremely change. First to punish people that do this type of corrupt actions, it doesn´t matter if there are coaches, players or managers. If they are soccer players they have to be punished with an economical consequence, if they are coaches or technical directors they have to be punishes with an economical debt and the remove of the license of managing the team, if they are managers that control and support the economy of the team they have to be punished with an economical debt and have to be fired, their license for managing the economy of the club would be removed and they can be in jail dependind on the severity of the case.

A cooperation agreement between the Ecuadorian soccer Federation, the Anticorruption Secretary of the Presidency and the Financial and Economic Analysis Unit was signed on Thursday, May 13, 2019. The agreement will allow working together to fight corruption around soccer in Guayaquil. One of the main benefits will be the creation of an Ethical Integrity Unit.

In Guayaquil the signature was made between he vicepresident of the federation of Ecuadorian soccer, Jaime Estrada, the boss of UAFE, Leopoldo Quirós and the secretary of anticorruption, Iván Granda. The initiative that proposes the UAFE and the secretary of anticorruption is to give a technical support to the federation and conforms a team between the three institutions. Their labour is to investigate complaints of alleged cases of corruption and prevent commitment of ilegal acts.

Jaime Estrada manifested that this alliances are part of Jobs with “transparency, balance of order and justice” that search with this new administration trying to give confidence for the people that thinks that the FEF still have corrupt people, with reports of information the UAEF will be investigating inusual movements of posible cases of money laundring.the Expresident of the Federation Luis Chiriboga Acosta is in jail of Latacunga seving a sentence of six years for commiting money laundering.

Increase earnings to soccer insdustries in Guayaquil

Leaders of the professional league of soccer in Ecuador are to analyze the increase the number of teams in the proffessional league in the next year. Miguel Angel Loor is analyzing the best and more convenient for soccer in Ecuador. He stablished that Ecuador is the second country with the longest schedule around the world, but with a lower quantity of teams in South America. Ecuador doesn´t receive the earnings that soccer in Ecuador deserves. The Federation would have the help of logistics, calendars, televisión rights and calendars that would give them an economic entry.

With the help of sponsors and ticket office because when a team plays in their stadium, tickets offices are useful to increase earnings to the club. With televisión rights, partners and marketings finance the team with at least twenty million dolars, with this increases clubs make signings of foreign soccer players that made soccer more attractive to the public, always club are interested in young players called “future stars”, coaches give them minutes to plat and demostrate their talent to the public. (Appendix 1, Picture 3)

A legal department with the Federation of soccer in Ecuador stablished the rules that are going to stay with the FEF: Control of doping, asignation of referees, resolution cameras and solve conflicts between soccer players or teams. With the increase from twelve to sixteen teams in the league A is a great idea to increase the earnings to the country, trying to copy a model from Chile, Mexico or Spain.

“Production is the only answer to inflation”, – Chester Bowles.

Inflation is the rate at which the general degree of costs for products and enterprises is rising and, therefore, the buying intensity of money is falling. Inflation has a lot of positive impacts it helps a lot to raise the GDP (Gross domestic product) of the country. Inflation is necessary for a country to develop its economic growth. Most of the businessmen, economist and government has maintain the moderate inflation levels that are expected to drive consumption accepting that more significant levels of spending are essential for economic growth. How inflation has a positive impact? Firstly, when inflation occurs there will be an increase in productivity. Secondly, it gives benefits to investors/company. Thirdly, government is benefitted from inflation too because GDP (Gross domestic product) increases when there is inflation.

When the makers get the right investment, they make more goods and services. When the businessmen sell their goods at higher prices, they get more profit which led them to increase their production of goods. Inflation gives more benefits to those sellers who deal in precious materialistic items such as gold, silver, diamond, bronze etc. When inflation occurs it benefits the businessmen due to which they expand the business and open or make more business which decreases the unemployment and benefits the economy of a country. Government gives benefits to the business or companies because they invest huge amount of capital in the country which become the reason of rising the economy by creating jobs which ultimately effects the stock market. But due to inflation the purchasing power of middle class and lower-class people falls. But inflation is important to strengthen the economy of a country.

Inflation benefits those investors who are waiting for the rise in prices and it benefits investors in such a way that the value of their assets, stocks, bonds, mutual funds increase which they can sell to the people at higher prices and get there favorable profits according to their demands. For example, if a person has purchased a home for 90lacks then due to inflation he will sell his asset (home) more than 90lacks. A few organizations receive the benefits of inflation if they can charge more for their items because of a flood sought after for their goods. On the off chance that the economy is performing great and housing demands is high, home-building organizations can charge more significant expenses for selling homes. As it were, inflation can furnish organizations with estimating force and increment their net revenues. In the event that net revenues are rising, it implies the costs that organizations charge for their items are expanding at a quicker rate than increments underway expenses. Mostly customers became the reason for rise in prices because when they consume a specific product too much made by a specific company then company use this product to earn more profit by increasing the price of that product which consumers consume a lot. Such products like oil, gas etc. are those products in which prices increases gradually or rapidly in inflation because these products have high value and are used on daily bases at home, factories, stations etc.

Inflation is good for the economy and to increase the GDP (Gross domestic product). Deflation is potentially very damaging to the economy and can lead to lower consumer spending and lower growth. For example, when prices are falling, consumers are encouraged to delay purchasing in the hope prices will be cheaper in the future. Imports and exports of goods are important for the government but when there is no inflation then the prices of goods falls, which makes exports easier but imports costlier. When economy is not running well then theoretically inflation helps by increasing production. To make better GDP and to reduce unemployment rate government should have to increase inflation because both have inverse relation. Inflation benefits the government in such a way that it reduces its debt which had to be paid in the future. Inflation effects the cash of the economy as well because when inflation is increased prices of goods are also increased and the purchasing power decreases which benefits the government in different ways. One of the benefits from inflation to the government is that it imposes higher taxes from which the government pay their loans because each dollar become less valuable which ultimately reduces debt of the country. Gross domestic product (GDP) increases in with inflation and the debt of the country becomes smaller in number which becomes easy for the country to pay their debts which is their liability. A moderate expansion rate diminishes the genuine estimation of obligation. On the off chance that there is flattening, the genuine estimation of obligation expands prompting a press on expendable livelihoods. Moderate paces of expansion enable costs to modify and products to accomplish their genuine cost. Moderate paces of pay expansion, enable relative wages to alter. Wages go down a moderate expansion, firms can freeze pay for less gainful specialists – to adequately give them a genuine compensation cut. Moderate paces of swelling are an indication of a solid economy. With financial development, we typically get a level of expansion.

While increasing demand is generally great news for an economy, a lagged supply chain can cause Inflation. In this blog post, we’ll go through why this is a very real issue facing economic managers all around the world.

Firstly, what is inflation? Inflation occurs when the demand for a product/service is greater than the current supply. When this occurs, the products value will naturally rise to meet the maximum amount consumers are willing to pay for the supply available. This happens in all markets in some form or another, it’s very apparent in currencies like the US Dollar and even Bitcoin while it also occurs very subtly in retail markets. As I suggested in the opening sentence, increasing demand is usually the result of a growing economy which is generally desirable, but when unmatched by the economies suppliers significant harm can come to parties affected by inflation. Here’s how:

A gradual decrease in real purchasing power refers to the actual purchasing power to the value of the dollar, this can be a consequence as those on fixed incomes. While most employed people will gain wage increases to align with inflation many members of the economy don’t have this luxury. Pensioners/retirees are a great example of a fixed income member, as they’re often living on a set amount of funds supplied by their savings or a government welfare program. Therefore, when prices rise it’s quite common that they will not be able to purchase the same quantity of goods/services. Effectively the value of their dollar is depreciated by the increase of cost of products.

Greater inequality is likely to occur as those with higher incomes are less affected by the movement of prices on commonly purchased goods such as groceries and other necessities. Whereas lower income households will be more sensitive to price movements as they take a greater proportion of their income. Living expenses are generally quantified on a bare necessity level, everybody needs toothpaste though a 50-cent price increase won’t affect all members of the economy evenly.

A less efficient economy can be present when inflation occurs as new businesses are much more likely to engage in less efficient business practices to take advantage of abnormally high prices. When a supplier isn’t required to be scrupulous of expenditure, they are far more likely to cause waste in the economy. Waste in this sense can be described as when resources are not used to create the greatest possible quantity of outputs. A business may cut corners and allow inefficiencies due to less needed concern on costs.

Weak international competitiveness is more commonly a long-term effect of inflation. As living conditions and product prices increase domestically, so does the costs of production. This is a problem in first world countries as they’re unable to produce products at a low enough price point to compete on global market. Competitors in nations with cheaper costs will often outproduce and outsell first world nations due directly to their inability to compete with inflated prices.

There will be less savings in the economy, as a greater proportion of net income will be handed out to cover expenses of the now inflated prices. When the population is in a less-saving mood, the economy will generally adjust to a cash shortage. In which, banks will have less money available to loan and therefore higher interest rates are likely. This is one of a few ways that an economy can throttle itself into a stall. As interest rates rise to reduce the amount being borrowed, businesses and mortgage holders may be forced to default on their borrowings, leading to economic downturn.

Egypt has one of the longest histories of any other nation, tracing its heritage until the sixth or fourth millennium BC. Egypt saw some of the earliest developments in writing, agriculture, urbanization, organized religion, and central government. The Egyptian economy depends mainly on agriculture, telecommunications, oil and natural gas exports and the tourism industry. Also, more than three million Egyptians are working abroad, mainly in Saudi Arabia, the Persian Gulf and Europe, who send remittances to the country, as well as revenues from the Suez Canal.

The Egyptian Pound (EGP) is the official currency of the Arab Republic of Egypt, as designated by ISO 4217. Also, the pound’s symbol is E£.

The unemployment rate had a significant change in 2017 to 2018 due to the ongoing national megaprojects. The public sector has been making several efforts such as Suez Canal expansion, road extensions, and New Administrative Capital, which have employed thousands of Egyptians.

In 2001, began a managed float that continued until 2016, which made its currency reduced its value by almost 50% against the dollar. As an example of the continued deterioration of the EGP’s value, as of May 2018, the exchange rate was 17.6 Egyptian pounds to every dollar. Since the 2016 devaluation, the Central Bank of Egypt has taken several steps to shore up EGP and the Egyptian economy as a whole. In April 2018, the government announced a reduction in interest rates, the second 1-percent rate cut in two months, meant to attract investments from home and overseas.

Egypt has received foreign aid from the United States since 1979 (an average of $2.2 billion annually) and is the third largest beneficiary of such US aid funds after the Egyptian society is moderately unequal in terms of the income distribution, and it is estimated that between 35-40% of the country’s population earns less than the equivalent of two dollars a day, while only about 2-3% could be considered rich. Also, Egypt is among the poorest and youngest nations across the Arab world. As the economic conditions deteriorate, consumers spend more time finding better deals and shopping at informal outlets nearby. Lastly, despite Egypt having the largest population of Internet users in the MENA region, only 8% of Internet users are reported to make online transactions.

The country’s economic conditions have started to improve considerably after a period of stagnation due to more liberal government policies, rising tourism revenues, and a rising stock market. Foreign direct investment (FDI) in Egypt increased considerably before the fall of the Hosni Mubarak regime, surpassing $ 6 billion in 2006 due to liberalization and privatization. Since the fall of Hosni Mubarak during the 2011 Egyptian Revolution, the country has experienced a drop in investment and foreign tourist revenues, followed by a 60% drop in foreign exchange reserves, a three percent drop in growth and a rapid devaluation of the Egyptian pound.

One of the actions that the new government is doing is shut down a mechanism that assures that foreign investors can repatriate their external currency earnings. Thereby, this move could mean more volatility for the stagnant Egyptian pound.

Egypt’s external debt is reportedly approaching the $90 billion mark. In terms of gross domestic product, the external debt had reduced from 2017 to 2018 but still a significant debt. The government is using a strategy to reduce the inflation rate and this strategy might have proven effective but it exposes the economy to the risk of an external debt default if it keeps growing at this current rate for a few more years.

The economy of Egypt was a highly centralized economy under President Gamal Abdel Nasser and remains an autocracy with a political regime undergirded by a powerful, economically-influential military. In the 1990s, a series of International Monetary Fund arrangements, coupled with massive external debt relief resulting from Egypt’s participation in the Gulf War coalition, helped Egypt improve its macroeconomic performance.

Since 2000, the pace of structural reforms, helped Egypt move towards a more market-oriented economy (more private) and prompted increased foreign investment. The reforms and policies have strengthened macroeconomic annual growth results due to public investments, private consumption, and exports of goods and services. These practices are creating jobs and changing the unemployment rate scenario.

Overall level of economic development Egypt is one of the most developed countries in Africa, it has the 2nd largest economy (behind Nigeria) in terms of GDP total nominal and is relatively stable. The country results in economics are getting better among the years. However, still is classified as a developing country in the world.

In conclusion, Egypt is an interesting country to invest especially in services that are an industry that is growing fast. Also, is considered a stable country in base on his credit rating by Moody’s S&P, and Fitch and the GDP is getting better every year with the new government since 2016.

References

1. https://pt.wikipedia.org/wiki/Egito#Turismo
2. https://www.investopedia.com/terms/e/egp.asp
3. https://www.bbc.com/news/business-37857468
4. https://egyptianstreets.com/2019/05/01/employment-rate-in-egypt-rises-to-90-1-capmas-report-reveals/
5. https://en.portal.santandertrade.com/analyse-markets/egypt/reaching-the-consumers
6. https://pt.wikipedia.org/wiki/Egito#Turismo
7. https://www.investopedia.com/terms/e/egp.asp
8. https://www.bbc.com/news/business-37857468
9. https://egyptianstreets.com/2019/05/01/employment-rate-in-egypt-rises-to-90-1-capmas-report-reveals/
10. https://en.portal.santandertrade.com/analyse-markets/egypt/reaching-the-consumers

Giving people the resources and ability to learn about how things are going in our economy is an extremely important thing. One issue that is especially prevalent in today’s economy is inflation and how it affects the overall well-being of the people in our country and around the globe. This economic issue affects every member of our society, and it is especially important that our citizens keep themselves well-educated on this topic. In a sound economy, costs will in general increase – this is known as inflation. While you probably won’t care for that as a buyer, price growth rising moderately is an indication of a solid, developing economy.

The U.S. Federal Reserve currently considers a 2% inflation rate to act as the best growth rate for the economy, which is about its present level. Be that as it may, a few financial analysts, including those at the Federal Reserve, stress the economy is debilitating, which would make inflation dip under its objective, which is something that needs to be avoided at all costs. The most recent information, which was released to the public on June 12, implied that this might be occurring.

Inflation is characterized as the changes in the costs of all of our possible expenses, ranging from a bag of dog food to a yearly flu shot at your local pharmacy. A tool called the consumer price index is frequently used to decide increases in salary or to modify benefits for retirees. The year-over-year change is the thing that we call the inflation rate. In the course of the most recent year, the cost of goods containing tobacco went up 4.6%, while the value of clothing fell 3%. Obviously, the real change in typical cost for basic items will differ from each individual based upon how they choose to spend their cash. The most recent information from the Department of Labor demonstrated an intently watched proportion of inflation was lower than anticipated in May, a stressing sign that the economy might be developing too leisurely.

Conclusion

A moderate measure of inflation is commonly viewed as an indication of a solid economy, in light of the fact that as the economy develops, the demand for goods and services grows. This growth of demand pushes costs somewhat higher as providers attempt to make a greater amount of what buyers and organizations need to purchase. When inflation becomes excessively low, or vice versa, a horrendous cycle can wreak havoc upon our economy. High inflation has a wide scope of negative ramifications for economies. At the point when work compensation is unable to stay in line with the inflation of retail costs, the power of purchasing of the paychecks that workers receive quickly diminishes. This causes a huge problem for households that are low income, because any increase in the price of any goods or services can have very serious negative effects. Laborers’ requests for growth in their wages can prompt an expansion in costs of labor, bringing about lower benefits for organizations. These impacts of expansion can make a high level of vulnerability in an economy, prompting diminished venture from those who aim to start their own businesses.

Let’s first know what’s ‘inflation’; it’s the increase in consumer goods and services price cause of producing several banknotes more than those goods and services itself. Or vice versa, which means there is a production surplus remains from the overall supply, or maybe because of the increase in production cost itself. A lot of causes could lead to inflation. Therefore, we must mention that there are four types of inflation.

The ‘normal inflation’, when the population increases the need for goods and services will increase, in this case, the government must involve facilitating the people’s life by producing more banknotes without cover which lead to increase in prices. And this is the most common type between countries, and that’s why governments always launch birth-control awareness campaigns to reduce the impact of population density.

Another type of inflation called ‘attractive demand inflation’ and this type always exists whenever the countries are increasing in prices because of the huge surplus in overall demand locally or internationally. This could be a temporary situation, or it could continue for a long time like what’s happening with the seasonal products (food, toys. etc.) in such cases the amount of spending does not match the actual amount of production.

The third type of inflation called ‘infiltrated inflation’ and it’s quite the same as normal inflation, but it happens when we face a decrease in production and an increase in prices. In this stage the consumer behavior changes to aggressive spending for the same products even if they don’t need it, for the time being, instead people save it as an inventory to avoid any increase in prices that could happen in the future. And that infiltrated inflation always holds back growth.

The fourth type of inflation called ‘runaway inflation or hyperinflation’, this type is very rapid and almost impossible to reduce. Usually, this type happens at the beginning of any transforming phase from economic stage to another, or the phase after the war is ending, we consider this type is the worst because people always lose trust in the current economic rulers.

In the end, we cannot assume if the increase/decrease in supply and demand is good or bad inflation unless we are fully aware of our country’s situation and the resources we own. Most of the studies mentioned that inflation could be good or bad for the economy, but it depends on the causes leads to this inflation and if the country succeeded to find the main reason behind that inflation. Therefore, countries should set proper monetary and anti-inflation policies so they can have a positive impact.

Have you ever thought about how inflation can affect us in a financial sense? This paper will go in depth and explain the causes of inflation and how it affects consumer behavior, income, investment, and business. In this paper we will go over the methods on how inflation is usually managed and what standards it meets to raise alarm about the economy. It will also provide explanations to understand news of inflation in an effective way.

Inflation is an economic term that has been used in many of the business and economic reports that are presented throughout the media today. Some people do not understand inflation in a clear way on how it works and how it affects our living, resulting people to simply ignore the importance that inflation has in the society. Inflation is the general increase of prices due to increasing consumers demand for goods and services that surpasses what businesses can produce. A cause to this is when employers concede wage increases that surpass profits in productivity, and then these employers would make up for these wage increases by charging consumers with higher prices to their products. In some cases, there could be an increase in the cost of products due to environmental or physical factors, such as, for example, the cost of eggs had risen because a virus had killed many egg-laying hens in poultry factories.

When the cost of goods and services rises, the buying power of the dollar declines significantly. During a period of inflation, a certain amount of money can purchase less than it used to. For example, an employee may receive a salary increase of 20%. If prices remain steady, the employee can buy 20% more goods and services. However, if the prices increase 20%, the employee’s purchasing power has not changed, but if the prices increased even more, the employee cannot purchase as much as he or she formerly could. This is especially difficult for workers with fixed incomes.

There are also different kinds of inflation: mild, moderate, severe, and hyperinflation.

Mild inflation is when the price level increases from 2 to 4% a year. If a business can pass the increases along to the buyer, the economy flourish; jobs are plentiful, and unemployment rates go down. “A risk in a growing economy is that it may grow too fast” (Prentzas, 31). If incomes increase faster than prices, workers would have better purchasing power. Unfortunately, this would last for a while. Employers seek out for larger profits through periods of economic growth, and unions seek out higher wages. This would result to prices rising even further, meaning increasing inflation.

Moderate inflation happens when the price level increases from 5 to 9%. During moderate inflation, prices increase more rapidly than wages, making the purchasing power to decline. Most individuals would buy more because they want more goods and services before the prices would increase even further. The increase in demand would eventually make the prices to go up more.

Severe inflation (or double-digit inflation) is when the yearly rate of inflation is 10% or higher. Expectantly the prices go up even higher than the wages, so, it is expectant for the purchasing power to decline even more. It can also decrease a country’s output of goods and services by decreasing demand from foreign and domestic consumers since the products have become more expensive. Demand for exports decline because other countries would seek out for cheaper alternatives and so would the domestic consumers.

Hyperinflation is the worst, with uncontrolled and rapid inflation. It usually happens when a government coins money to back a level of spending much larger than what it collects in tax revenue, usually because it can no longer back its budget deficit by selling bonds. The huge amount of money being distributed would initiate a huge decline in its value. When money loses value, it would not be in much use because many people would trade goods and services, not currency. Hyperinflation had caused downfalls in the economies of some nations during or after war.

Knowing what you hear about inflation is quite nice. The inflation rate in the United States is usually measured by the Consumer Price Index (CPI), a monthly measure, done by the Bureau of Labor Statistics. It tracks price changes of a representative group of goods and services that are regularly purchased such as food, clothing, housing, medical care, etc. The total price of these items is compared with their total price during a base period (an earlier period.) As a consumer, the lower the calculated number is, the better.

To control inflation, the government would reduce its budget deficit (the amount by which a government’s spending surpasses its revenue) or reduce the money supply. Most governments use their money supply to try controlling inflation, the practice being labeled monetary policy. The monetary policy of the United States is managed by the Federal Reserve System. The Federal Reserve can try to reduce the rate of inflation by increasing interest rates on loans; encouraging people to spend less money and loaners will not have to keep increasing prices, so that inflation calms down.

The government may also follow along with the fiscal policy, which involves its spending and taxing programs. The government can use these programs to reduce the demand of goods and services. It can reduce its spending by buying less from businesses, causing a reduction in sales and people would have less money to spend. It can also reduce the income of consumers by raising taxes, making them to spend less money, easing the demand for goods and services, which leads to inflation leveling off.

Another way to fight against inflation would be wage and price controls established by the government to limit wage and price increases during an inflationary period. Some economists assume that if a government limits these increases, wages and prices would level off, and others believe that controlling them would be ineffective, while others think that trying to control them would interfere with the natural rise and fall of wages and prices. However, implementing wage and price controls have been proven ineffective in advanced economies.

An increase in inflation can lead to erratic investments. Usually, prices give out signals that help individuals and businesses make the economic choices that break down the factors of production. With inflation, people would have a distortion of that process and begin to speculate (to buy things of huge value thinking they would increase in value later on). People would not invest as much as before and would continue to speculate, giving a bruise to the economy.

With wage increases being slower than the rising inflation, one might feel down, as the cost of living increases. By looking at the long term, one should at least start saving for future needs. Currently we are experiencing mild to moderate inflation but it is not too late or too early to start investing in your savings or retirement.

Works Cited

1. ‘How Does Inflation Affect You?’ 18 Oct. 2011. Web. 4 Dec. 2019.
2. ‘How Inflation Affects Your Cost of Living’. Investopedia. 15 Aug. 2014. Web. 4 Dec. 2019.
3. ‘Inflation: What Is It And Why Should I Care? – The Simple Dollar’. The Simple Dollar Inflation What Is It And Why Should I Care Comments. 26 Feb. 2007. Web. 4 Dec. 2019.
4. ‘Inflation’. The World Book Encyclopedia. 2013. Print
5. Prentzas, G.S. How Interest Rates, Credit Ratings, and Lending Affect You New York: Rossen Publishing, 2013. Print