The factors mentioned in articles can cool down the inflation.
We all know that inflation is a sustained upwards movement in the average level of prices. The article above claims that the situation of inflation is cooling down by the slowdown of economy.
The writer has given several aspects on how inflation is cooled down. Firstly, it gives us a price data. The data shows that the percentage of consumer prices decreases to +0.2%. From the data, we can find clearly that the inflation is exactly decreases. Then, the article gives the explanation which is mainly about job market, the action of companies and the purchasing power.
As we know, the control and reduction of inflation will however depend on what is causing the inflation. In the article, the writer mentions the interest rate several times. Increase or decrease the interest rate is mainly to solve the demand-pull inflation. Demand-pull inflation is caused by persistent of the AD curve to the right. AD can increase by a rise in one or more of the components of AD: consumption, investment government spending or net exports. If the excess demand is caused by excess money, then monetary policy will be used to reduce that demand. Monetary policy uses two main, interlinked tools: the quantity of money, and the price of money, ie the interest rate. If the aggregate demand is too high because there is too much money, then the answer is to reduce the money supply, or alternatively to raise the interest rate just like writer saying in the article. Raising the interest rate is also equal to decrease the purchasing power.
Job market and some actions of companies is involved in cost-push inflation. Cost-push inflation is caused by the SRAS curve shifting to left. An increase in firms’ costs, eg by wages rising or raw material costs rising, shifts the SRAS curve to the left. There are several types of cost-push inflation. They are... [continues]
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