Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. It can be defined as too much money chasing too few goods. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.
Inflation occurs due to an imbalance between demand and supply of money, changes in production and distribution cost or increase in taxes on products. When economy experiences inflation, i.e. when the price level of goods and services rises, the value of currency reduces. This means now each unit of currency buys fewer goods and services.
It has its worst impact on consumers. High prices of day-to-day goods make it difficult for consumers to afford even the basic commodities in life. This leaves them with no choice but to ask for higher incomes. Hence the government tries to keep inflation under control.
Contrary to its negative effects, a moderate level of inflation characterizes a good economy. An inflation rate of 2 or 3% is beneficial for an economy as it encourages people to buy more and borrow more, because during times of lower inflation, the level of interest rate also remains low. Hence the government as well as the central bank always strive to achieve a limited level of inflation.
Inflation in Indonesia is not only a monetary issue or one that occurs simply because of excess demand and can be addressed with monetary policy. More frequently, general price increases are caused by food price volatility or supply shocks that in turn are often caused by poor and inadequate infrastructure, logistics and inefficient supply chains. Regional economic discrepancies make the problem of inflation more complex.
The structure of the regional economy has not undergone significant changes over the last 10 years. Java remains the major driver of national economic growth with a share of 57.65 percent of gross domestic product (GDP), followed by Sumatra with 23.74 percent. The remaining 18.61 percent is contributed by Kalimantan, Sulawesi, Maluku, Papua, Bali and Nusa Tenggara, according to Central Statistics Agency (BPS) data from May 2014.
source : http://en.wikipedia.org/wiki/Inflation
http://economictimes.indiatimes.com/definition/inflation
Question 5W & 1H.
1. What is Inflations?
2. Why Inflations could occur?
3. Who is the most responsible for the occurrence of inflation?
4. How inflations occurs?
5. In Indonesia, Where is the structure of regional economic has not undergone significant changes over the last 10 years?
6. How the goverments cope with inflation?
Conclusions:
Inflation occurs due to an imbalance between demand and supply of money, changes in production and distribution cost or increase in taxes on products. When economy experiences inflation, i.e. when the price level of goods and services rises, the value of currency reduces. This means now each unit of currency buys fewer goods and services.
It has its worst impact on consumers. High prices of day-to-day goods make it difficult for consumers to afford even the basic commodities in life. This leaves them with no choice but to ask for higher incomes. Hence the government tries to keep inflation under control.
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