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Measures of Inflation Assignment Help
First of all we would like to thank to Allah as finally we were able to finish our assignment that have been given by Macroeconomics lecturer to us. This task had been done with all afford by group members even though a little bit problem were happened among us while doing this assignment. Luckly, all the problems can besettle down and we were able to adapt properly and wisely.
Topic that been chosen by our group are Inflation issues from the year 2006 to 2015 and the roles of Malaysian government in controlling the inflation. On the other hand, big thank also we address to others Macroeconomics lecturer Madam Siti Norhaliza Binti Osman that always teach us and guide us to understand the things that we should know while studying Macroeconomics and also in producing good project work.
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“Inflation can be defined as a continuous increase in the general price level of goods and services in the economy.”(vengedasalam & Madhavan, 2014) During the inflation, the general price level will continuous increase. But, not all of the product and services will increase, it is only in certain product and services. For the example, when the price of bus increase to 22%, it does not mean that all of every services price are increasing by 22%. It is only the average increase.
“Deflation refers to a decrease in the general price level of good and services in the economy”.(vengedasalam & Madhavan, 2014) Deflation is the decreasing of the general price level and it is opposite to inflation.
Stagflation is a condition of slow economic growth and relatively high unemployment. When the high of unemployment,the spending will declines, as do prices of goods. According to (vengedasalam & Madhavan, 2014) there are various degrees of inflation, such as:
- Creeping inflation – a sustained rise in prices, i.e. by about 2% per year.
- Mild inflation – a sustained rise in price by about 8% to 10% per year.
- Hyperinflation – occurs when monthly prices rise by 50% to 60% or more.
InMalaysia, Malaysia always face the Inflation in over 7 years. From 2006 to 2015,the inflation rate is high in 2008 it because by the oil price shock which is caused by the international commodity prices continued.
- Measures of Inflation
“KUALA LUMPUR (REUTERS) – Malaysia’s consumer price index in September rose 2.6 per cent from a year earlier on higher prices for consumer goods, below expectations and moderating from August, government data showed on Friday (Oct 23).
The figure was below the 3.0 per cent median forecast by economists in a Reuters poll, and a 3.1 per cent reading in August.
Inflation has been picking up since a 6 per cent Goods and Services Tax was introduced in April.” (Malaysia inflation cools more than expected in September, 2015)
(Retrieved from: http://www.tradingeconomics.com/malaysia/inflation-cpi )
In Malaysia, the Consumer Price Index or CPI measures changes in the prices paid by consumers for a basket of goods and services..(Malaysia Consumer Price Index (CPI), 1972)
Based on the graph given, the Index point in 2006 is 89 and it increase constantly to 2007. But, the inflation happen in 2008 because of the CPI are increasing too high from 94 to 101, the different of the CPI is 7. But, in the same year the CPI decrease from 101 to 98 and it makes the deflation happen when the deflation happen, it have a good effect and the bad effect, the good effect is the consumer can spending more in their expenditure. But, the bad effect is all of the producer will loss their profit because of they buy a raw material in the high price during the inflation happen, but the sale it during the deflation.
Started from 2009 to 2015 the CPI increase constantly it make the Malaysia economy being stable.
Inflation rate from 2006 to 2016
|YEAR||INFLATION RATE %|
Figure 2 Inflation Rate from 2006 to 2015
Figure 3 Inflation Rate Graph since 2006 to 2016
(Retrieved from: http://www.tradingeconomics.com/malaysia/inflation)
The trend of the inflation rate from 2006 to 2015 is not constant. In 2006, the inflation rate is 3.6% but is decrease to 2.0 in 2007. Malaysia almostfaces the mild inflation in May 2008 because the inflation rate rose to 7.7%. In the situation the general price level of goods and service in the economy are increase and it effect at all of the consumer and producer. Since the inflation on 2008 “ Consumer prices in June rose 7.7 percent compared with the same month in 2007, more than double the 3.8 percent annual inflation rate recorded in May, according to data released late Wednesday by the Statistics Department.”(ssquah, 2008)
But, in 2009 Malaysia face deflation because of the reduction in the rate of inflation to 0.6%. From 2010 to 2015, the inflation rate is stable and increasing constantly.
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