Policies to reduce cost-push inflation


Cost-push inflation is caused by higher costs of production, such as rising oil prices, higher nominal wages, and increased commodity prices. To reduce this kind of inflation, the government can pursue deflationary monetary policy and/or supply side policies. But, in truth, it is difficult to reduce cost-push inflation because higher interest rates are likely to …

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The impact of supply bottlenecks on world economy


Bottlenecks refer to the situation where firms are unable to meet demand because of delays, shortages and lack of spare capacity. Bottlenecks can occur from a spike in demand or disruptions to supply. They can lead to higher prices, inflation, shortages of goods and even lower economic growth. For many years, we have grown accustomed …

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Inflation tax


“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily,” John Maynard Keynes, “The economic consequences of the peace” Inflation tax is an implicit tax on nominal assets, such as cash, bonds and …

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Learning effect – definition, explanation


The learning effect can mean one of two things How education leads to increased productivity and higher wages How production processes can learn from past production to increase productivity over time. The learning effect can lead to a learning curve – which represents how average costs of production change over time. Learning effect – Education …

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How to reduce our dependence on fossil fuels

External costs from pollution

Despite the urgency of climate change and the rapid fall in the price of renewable energy sources, the world still relies on nearly 80% of its energy source from fossil fuels. Accelerating the shift away from fossil fuels will have large environmental and economic benefits, yet progress is much slower than we need. The problem …

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Why inflation makes it easier for government to pay debt


Reader’s Question: Why Does Inflation Make it Easier for Governments to pay back the debt?   The big fall in national debt as % of GDP occurred during relatively high inflation periods of 50s, 60s, and 70s. The 1920s and 30s were a period of deflation and high debt. There are a few reasons inflation …

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Impact of higher wheat prices


Higher wheat prices will have a significant impact on raising food prices and reducing living standards; it is feared it could cause widespread poverty and social unrest. The impact of higher wheat prices will be felt disproportionately by low-income consumers and major wheat importing countries, such as Egypt and Nigeria. This is because consumers on …

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