MLS 2C

Azucena, Marry Jennylou

Mucho, Ma. Monique
Ong, Shiennah Josefina
Rendon, Paulin
Resano, Lance Ervin
(Group 2)

What is INFLATION?
Inflation

refers to General rise in Prices

measured against a Standard Level of
Purchasing Power.

It

is the percentage change in the value of the

Wholesale Price Index (WPI) on a year-on year
basis.

Types of Inflation
Creeping

Inflation

Creeping or mild inflation is when prices rise 3% a year or less.

According to the U.S. Federal Reserve, when prices rise 2% or less, it's
actually beneficial to economic growth.

Walking

Inflation

This type of strong, or pernicious, inflation is between 3-10%

a year. It is harmful to the economy because it heats up economic
growthtoo fast. People start to buy more than they need, just to
avoid tomorrow's much higher prices.

 Galloping

Inflation

Happens when inflation rises to ten percent or greater.

Money loses value so fast that business and employee income can't
keep up with costs and prices.The economy becomes unstable, and
government leaders lose credibility.

Hyperinflation
Hyperinflation is when the prices skyrocket more than 50% a month.
It is fortunately very rare. In fact, most examples of hyperinflation have
occurred when the government printed money recklessly to pay for
war.

Consumer Price Index (CPI)

The CPI represents prices paid by consumers (or households).

Prices for a basket of goods are compiled for a certain base
period. Price data for the same basket of goods is then collected
on a monthly basis. This data is used to compare the prices for a
particular month with the prices from a different time period.
Example:
The inflation rate is computed by subtracting the CPI of last year's
prices from the CPI value for this year, dividing that difference by last
year's CPI value and then multiplying by 100.
So if the value of the price index for the current year is equal to 165,
and last year's value was 150, the rate would be calculated as:

Inflation rate =(165 - 150) X 100

150
= 10

Main CAUSES of Inflation

Demand-Pull

- This type of inflation happens when the

aggregate demand increases more than the
supply.
- The economy demands more goods and
services than what is produced.

 Cost-Push

- When the cost of production increases, the price

level automatically increases.
- It occurs when there is a shortage of supply
combined with enoughdemandto allow the
producer to raise prices.

 Money

Supply

- A third cause of inflation is an over-expansion

of themoney supply. The money supply is not
just cash, but also credit, loans and mortgages.
When loans are cheap, then there will be too
muchmoneychasing to few goods, creating
inflation.
- The prices of just about everything will
increase, even though neither demand nor
supply has changed.

What else could cause inflation?

Rising

house prices

Rising house prices do not directly cause inflation, but they

can cause a positive wealth effect and encourage consumer led
economic growth. This can indirectly cause demand pull inflation.

Printing

more money

If the Central Bank prints more money, you would expect to

see a rise in inflation. This is because the money supply plays an
important role in determining prices. If there is more money chasing
the same amount of goods, then prices will rise.
Hyperinflation
is usually caused by an extreme increase in the
money supply.

EFFECTS of Inflation
Reduces

the Value of Money

Higher Wage demands
Increase in Tax Revenue
Hoarding

 Reduces

the Value of Money

Inflation reduces the value of money thus

making you pay more in the process. As a result,
the value of themoney in handgets reduced and
the amount that you thought of depositing into
savings is spent covering the additional costs of
purchasing necessities.
Higher

Wage demands

Price increases lead to higherwage demandsas

people try to maintain their real living standards.

 Increase

in Tax Revenue

The government gains from inflation through

what is called fiscal drag effects.
Hoarding

People buy durable and/or non-perishable

commodities and other goods as stores of wealth, to
avoid the losses expected from the declining
purchasing power of money, creating shortages of
the hoarded goods.

Effects On Health Care

As patients start bearing the genuine cost of
their care, they will start behaving like real
consumers and become much more attentive to
price. Once health-care services provision is
transformed into a true marketplace in which
prices are driven both by supply and consumer
demand, competition between providers should
result in prices falling even further.

Policies To Reduce Inflation

1. Monetary Policy
- process by which themonetary authorityof a country controls thesupply of
money, often targeting an inflation rateor interest rateto ensure price
stability and
general trust in the currency

2. Supply Side Policies

- aim to increase long term competitiveness and productivity

3. Fiscal Policy
- involves the government changing tax and spending levels in order to influence
the level of Aggregate Demand

4. Exchange Rate Policy

- The exchange rate of an economy affectsaggregate demand through its effect
on export and import prices, and policy makers may exploit this connection.

5. Wage Control
- Wage growth is a key factor in determining inflation. If wages increase quickly
it will cause high inflation.

20 countries with the

highest inflation rate in
2014
In 2014, Uruguay ranked 20th with an estimated
inflation rate of about 8.79 percent than the previous
year. Higher inflation rates are more present in the
third world countries or developing countries because
they often lack a sufficient central bank, which in
turn results in the manipulation of the currency to
achieve short term economic goals.

Best Emerging Countries in 2014

http://www.statista.com/statistics/268225/countries-with-the-highest-inflationrate/

Philippine Inflation Rate

(Jan 2015)
Region 8
Region 9
Region 13
Region 5
Region 1
Region 10
Region 7
Region 2
Region 12
Region 6
Region 4A
Region 3
Region 4B
CAR
Region 11
NCR

Philippine Inflation Rate (Jan 2015)

Region

Jan-14

Region 8
Region 9
Region 13
Region 5
Region 1
Region 10
Region 7
Region 2
Region 12
Region 6
Region 4A
Region 3
Region 4B
CAR
Region 11
NCR

7.8
5.9
5.5
5.4
5.2
5.2
5.1
4.7
4.6
4.5
4.3
4.2
3.6
3.4
3.3
2.7

Philippine Inflation Rate (Dec 2014)

Region 8
Region 9
Region 13
Region 5
Region 1
Region 10
Region 7
Region 2
Region 12
Region 6
Region 4A
Region 3
Region 4B
CAR
Region 11
NCR

Philippine Inflation Rate (Dec 2014)

Region

Jan-15

Region 3

4.1

Region 12

3.6

Region 11

3.5

NCR

3.5

Region 4A

3.4

CAR

3.4

Region 7

3.2

Region 2

3.2

Region 6

3.1

Region 9

2.5

Region 13

2.4

Region 4B

2.4

Region 10

2.3

Region 5

Region 1

Region 8

1.5

Philippine Inflation Rate (Jan 2014)

Region 8
Region 9
Region 13
Region 5
Region 1
Region 10
Region 7
Region 2
Region 12
Region 6
Region 4A
Region 3
Region 4B
CAR
Region 11
NCR

Philippine Inflation Rate (Jan 2014)

Region

Dec-14

Region 4A
Region 3
Region 6
Region 11
Region 7
CAR
Region 2
Region 12
Region 1
NCR
Region 13
Region 9
Region 4B
Region 10
Region 5

4.1
4
3.9
3.9
3.8
3.8
3.6
3.6
3.4
3.4
3.2
2.9
2.5
2.4
2.1

Region 8

1.6

Region 6 Inflation Rate (Jan 2015)

Antique
Guimaras
Iloilo
Negros Occidental
Capiz
Aklan

Region 6 Inflation Rate (Jan 2015)

Province

Jan-15

Antique
Guimaras
Iloilo
Negros Occidental
Capiz
Aklan

6.7
4.8
4.2
3.7
2.1
-1.0

Region 6 Inflation Rate (Dec 2014)

Antique
Negros Occidental
Iloilo
Guimaras
Capiz
Aklan

Region 6 Inflation Rate (Dec 2014)

Province

Dec-14

Antique
Negros Occidental
Iloilo
Guimaras
Capiz
Aklan

6.0
4.2
3.9
3.8
2.4
-0.1

Region 6 Inflation Rate (Jan 2014)

Antique
Aklan
Negros Occidental
Guimaras
Iloilo
Capiz

Region 6 Inflation Rate (Jan 2014)

Province

Jan-14

Antique
Aklan
Negros Occidental
Guimaras
Iloilo
Capiz

6.3
5.2
4.6
4.5
4.1
3.2

http://web0.psa.gov.ph/business/price-indices