Inflation In Trinidad And Tobago

1161 Words5 Pages
PAPER 1 What is Inflation? Inflation refers to as a constant growth in the overall cost level for goods and services. It is measured as annual percentage increases. As inflation rises, every dollar you own buys a lesser percentage of a good or service. The value of a dollar does not stay continuous when there is inflation. The different types of inflation and the types that are experienced by Trinidad and Tobago. Inflation in Trinidad and Tobago is the direct result of a few influences that can harshly affect the country. Inflation affects most of the basic commodities such as food which can cause many issues for the average family. As we are dependent on other countries for goods, that has an opposing effect on the prices for consumer’s…show more content…
Causes of Inflation Demand-pull inflation states that the economy demands additional goods and services than is obtainable. This absence of resource enables vendors to elevate costs until a balance is put in place amid supply and demand. The cost-push theory, or "supply shock inflation", says that shortages to the available supply of a specific good or product will result in a rippling effect through the economy by elevating prices via the supply chain from the manufacturer to the customer. One can see this in oil markets. In addition, currency supply plays a significant role in inflationary pressure. Economists say that that if the Federal Reserve does not oversee the money supply efficiently, it may result in it actually increasing at a faster rate than that of the possible output in the economy, or real GDP. Little interest rates correspond with huge levels of money supply and allow for more investment in large business and novel ideas which leads to uncontrollable levels of surge in prices, as discounted money is available. What are the implications of rising inflation to an…show more content…
Companies will delay their undertaking due to insecurity in the marketplace. The effects will have undesirable results on the financial growth in the economy. • Redistributive Effects Increasing inflation will anguish persons who have continuous incomes, such as retired persons, students, and children. In addition, a growth in expenses of necessities such as food and clothing will have a consequence on the unfortunate sector of the society as they spend large part of their revenue on these items. This will lead to augmented injustice in the economy. • Less Saving Great rate of inflation will have a contrasting consequence on the investments in the economy. As people employ more to accept their present standard of living, not much is being saved. This will have an effect on fewer loanable funds being offered to firms for investment. • Damage To Export Competitiveness The export industry in the economy will be mostly affected. The cost of manufacture will increase and the exports will become less competitive in the foreign market. • Social

More about Inflation In Trinidad And Tobago

Open Document