BIG QUESTION: Describe the type of inflation in Iran and suggest possible
ways in which the government could control the inflation?
Minimum of 200 words.
Due in on Wednesday the 17th of October. Please complete on the blogspot.
Good luck.
Mr Wickham.
The type is cost-push inflation, as soon as the problem is not that people too much money to spend, on opposite, they don’t have enough money even on basic food staff. The cost-push inflation is caused mostly because of the economic sanctions on imports. The high sanctions made it hard to supply Iran with products, which mean that there are fewer goods, including ones that are necessary to make businesses or they lack of them and can’t start a business (also businesses suffer from the volatility of money). If businesses buy import raw materials then they have to increase the costs not to run out of business, so that the beginning of cost-push inflation. If there are fewer businesses, unemployment is going to increase. People have less money to spend as a result.
ReplyDeleteThe first thing how to reduce, they can reduce the import sanctions so that the inflation growth is going to reduce, the better environment for businesses, they don’t have to increase their costs because of the price for raw materials and people have more jobs and so more money to spend, including basic food staff.
Then they can they can cut taxes and increase subsidies so encourage people to set up businesses. As a result they will have jobs and money.
Also they can set up their own businesses (public sector), so more jobs provided, competition to private sector so more efficient and less costs the private sector will charge, and can control prices.
The central bank can decrease interest rates so people can afford more to borrow and more businesses can be set up (it also can increase to let them spend more, but in Iran it would be bad, as soon as it is not rich). But I doubt that Iran has a central bank.
sorry, second line from the end is "to let them save more"
DeleteBIG QUESTION: Describe the type of inflation in Iran and suggest possible ways in which the government could control the inflation?
ReplyDeleteThe type of inflation in Iran would be the COST-PUSH INFLATION. This type of inflation refers to the costs that a business has to meet, such as wages and raw materials. As these cost rises, the business will pass this increase onto the consumer by increasing the price of the product they are selling in the market. (They push up the prices). There are many different costs associated such as food costs that as a rise in the cost of food production due for example to a bad harvest. Raw material costs that when the costs of raw materials such as oil, steel and gas, there costs have continued to raise affecting many different prices and pushing up costs. Wage costs that is when the wages of the workers don’t increase at the same speed as inflation does so we as consumers end up paying more for the product we want. Exchange rate costs that is what happed to Iran that changes in the exchange rates can have a big effect on business as it is much more expensive to change. Land costs that is when land prices have risen in many countries as land is more widely used in production.
The government could control this inflation in several ways. There main aim is to create price stability in the economy. So we can say they do this through different policies. The first one would be by directly controlling the prices. This means that the government can set up prices for goods and impose limits on wage increases for public sector employees. The second way could by through the the fiscal policy (the government could reduce its own spending and raise taxes). In an attempt to reduce the demand for goods and services in the economy, if demand falls, then prices will fall. Also increased taxes mean the taxpayers income will fall. Will less money to spend the prices will fall. The final way could be through the monetary policy( controlling the quantity of money available for spending in the economy). The central bank is responsible for the control of the supply of money and setting interest rates. By printing less money and raising the cost of borrowing money, it is impossible to discourage people from spending and borrowing so this can reduce aggregate( total) demand.
Iran is going through an inflation we call cost-push. Cost-push inflation refers to the costs that a business/government has to meet such as wages and raw materials. As these costs ride, the business will pass this increase on to the consumer by increasing the price of the product they are selling. The rise in costs push up general prices.
ReplyDeleteThe problems Iran is facing include things such as economic sanctions from Europe, out of food subsides, problems with their currency, value of money has decreased, (undervalued), unemployment, lack of infrastructure, government control of mayor industries, increase in taxes and lastly financial instability.
In my opinion, the most important measure the Iranian government should take should be price stability. This would be to enable accurate planning and prevent high-rise in prices and rapid rise in these. To achieve this they should have a direct control of prices, in which the governments can directly affect the prices and wages in the private sector. Also, the government should reduce its spending and raise taxes, in an attempt to reduce demand for goods and services in an economy. Thus, controlling the quantity of money available, for spending it in the economy. Central banks would be responsible for controlling the supply of money and setting interest roles. By printing less money and raising taxes, the cost of borrowing money would be greater (higher interest rate), making people less encouraged to spend and borrow. The government of Iraq would be executing both fiscal and monetary policy.
Iran is suffering cost push inflation meaning that the business is passing the cost rise (of resources and wages) on the consumer by increasing the price of the goods and services. An example of the price increase is that families in Iran could not afford to buy meat for weeks for them to eat due to the price increase on food. The costs Iran is suffering are food costs where the food prices are increasing, and exchange rate cost where the exchange rate has a big impact on firms as they have to pay more for resources.
ReplyDeleteThe consequence of the inflation Iran is suffering is rise in price on goods and services and lower incomes on people who have fixed incomes.
The people who are suffering the inflation are the poor who can not buy as much food and necessary goods, the people with fixed income who cannot pay for goods as prices rise, savers because their savings are worth less and businesses because goods and services are reduced.
The other problems iran is suffering are unemployment, lack of infrastructure and problems with their currency as it is loosing its value
The possible ways the government could try to control inflation is by doing policies. The policies they can do are controlling the prices, impose limits on wages for public sector employees, the fiscal policy were the government reduces its own spending and raises taxes to reduce demand on goods and services (the fall in demand will cause the prices to go down), and the monetary policy which is controlling the quantity of money available for spending in the economy. The central bank (bank of banks which sets interest rates and prints money) does this by printing less money and raising interest rates making people borrow less money meaning people stop spending.
In the video, Iran is facing a COST-PUSH INFLATION. This is the cost that a business has to meet, such as wages and raw materials. As these costs rise, the business will pass this increase onto the consumer by increasing the price of the product they are selling. These raise in cost-pushup the prices! This involves other costs such as food cost, raw material and exchange rate costs. This happened in Iran because the subsidies of food and fuel where cut, food prices went up and they were twice as expensive as the year before and there was limit good and economic sanctions.
ReplyDeleteThere are lots of measures that Iran could take but the most efficient one is the Price Stability. A price and incomes policy is a set of measures by which the government sets prices and wages to create stability. There are various types:
1.- Direct control of prices. You can set prices for goods and impose limits on wage increase public sector employees. However this causes a problem such as altering the price mechanism making it less efficient way of consumers to signal preferences. There might also be conflicts between gov. and businesses as businesses might want prices to rise.
2.- The government could reduce its own spending and raise taxes in an attempt to reduce the demand for goods and services in the economy. If demand falls, the prices will fall. Also increase the taxes mean the tax payer’s income will fall. With less money spent also prices will fall.
3.- Controling the amount of money availiable for spending in the economy. The central bank is responsible for the control of the supply of money and setting interest rates.
The governments management of the quantity and price of money is called MONETARY POLICY
Inflation in Iran has affected the country massively, and in many ways. Inflation is a general rise in all prices. This is not that bad in a controlled manner and overtime but problems start when these rises in prices are quick, and in the case of Iran, it is happening at a very high speed. To start off with, food itself has doubled in price since a year ago. There is a general short supply of products, but prices still are high and keep on rising. The government is cutting food subsidies as well as fuel, and this is done to try to stop or at least slow down the inflation. Quick inflation is also causing currency problems. For example, a year ago, 1200reals where worth a dollar, but now the value has halved within a year. In 3 days, the currency has lost up to 20%, and this is only in the last 3 days. With such volatility, the government cannot plan ahead because the rise in prices is so sudden and dramatic. With this level of inflation, everything loses value. The general rise in prices affects only a few people at first, but then the costs pass on. Many businesses in Iran have gone bankrupt and have had to close down. As the costs are passed on, this type of inflation is called cost push inflation which is when costs that a business has to meet such as wages and raw materials, as these costs rise, the business will pass the high prices on to have an increase affecting the consumer by increasing the price of the products they are selling, so in conclusion the rise in costs push up the prices. This is a vicious circle, but obviously a very bad one and affects everyone in the country. Up to 40%of the large cities are mostly unemployed. People mainly blame the sanctions put by the government; but other main causes of the inflation is lack of investments in infrastructures, government controls in oil and gas industries, the raising of taxes by the government and the cut in food subsidies. As we can see, these causes are all to do with government involvement in the economy. Maybe the government intervened to try to stop or at least slow down the inflation that is going on in Iran, because one of the government’s aims is to control inflation. What the government can do now is for example do things and take actions so that the value of the currency does not go down in significant values every single day! It can also get cheap infrastructures so that the country dos not lack in infrastructures but at the same time not spending a lot of money. The cutting of food subsidies is good. The control over the gas and oil industry is a good decision to make because a private company could not have control over such a big and important firm, but the government could invest the money gained into having infrastructures built for example. The raising of taxes should be quite controlled and not to let the taxes go up too high because otherwise as individuals need to pay more taxes to the government, they would also have to higher their prices to earn money and cost push inflation would be present once more.
ReplyDeleteBIG QUESTION: Describe the type of inflation in Iran and suggest possible ways in which the government could control the inflation?
ReplyDeleteThe type of inflation here present in Iran is cost-push inflation. This refers to the costs that a business has to meet, such as wages and raw materials. As these costs rise, the firms will increase the price of their products that they are selling. The rise in costs pushes up the prices.
The way governments used to control inflation was by the raising and lowering of central bank interest rates. This had the effect of raising or lowering the relative value of the national currency. But the currency in Iran has gone down in value and it is worth half of its original value 1 year ago. It also affected the money available for investment and the running costs of most businesses. So a reduction of interest rates would reduce the value of the currency, make exports cheaper, imports dearer and make businesses more profitable. However if not carried out carefully this could increase demand for products, particularly imports and create inflationary. The remedy was to raise interest rates to cut demand and sadly put more people on the dole to reduce the wage claims.
Iran cannot even afford basic food stuffs, so the population is more likely to save and not spend as much on unnecessary things. There is also a lack of investment, companies are going bankrupt because of this very sudden change.
Inflation is the general rise in prices in an economy over time, at a rapid rate. Inflation at a slow and steady rate can actually prove positive, and the economy benefits from it as it encourages businesses to produce as a result of the slow and steady increases in prices. That is not the case in this video. Prices are rapidly increasing. There are two main types of inflation: Demand pull and Cost push.
ReplyDeleteThe type of inflation that Iran is suffering in the video is Cost-Push inflation, which is rapid inflation as a result of businesses passing on their increased costs to consumers, and making them pay more by increasing the prices. As prices increase, businesses need a way to obtain the same amount of revenue at the end of the day. If their costs increase, then to keep the same amount of revenue they need to increase the price of the products to keep up with rising costs, which is why prices end up rising.
This is clearly demonstrated in the video, where working class citizens could not even afford to have a plate of meat on the table, because businesses kept raising the price to adjust to the rising costs.
To counteract this and combat inflation, the government could do a number of things. The government could first directly control the prices, setting up prices for goods and imposing limits on wages. The government could also reduce its own spending and increase taxes to reduce the amount of demand in an economy. If the demand falls, then so will prices. As well as this, the government could just control the amount of money available in an economy, but being careful not to print more money than there actually is in an economy. The governments management on the quantity and value of money is called Monetary Policy.
Some good answers, but overall you all could have written more. The solutions to the problems could have been better done as you all needed to focus more on the problems Iran has in keeping costs down. Not enough facts from the video.
ReplyDeleteHere are your results:
Sanzhar C+
Need to be clearer in terms of the producers passing on cost increases as higher prices to the consumer. Good attempt at solutions for the government.
Marcos Diaz C+
A good start to your answer, but few facts from the video and your solutions were all about controlling demand and not about helping with costs or controlling exchange rates or sanctions.
Altair C
A good start to your answer, too brief about solutions, few facts from the video and your solutions were all about controlling demand and not about helping with costs or controlling exchange rates or sanctions.
Felipe C
A good start to your answer, too brief about solutions, few facts from the video and your solutions were all about controlling demand and not about helping with costs or controlling exchange rates or sanctions.
Ibon C-
Please do not LIST information Ibon!!!!
A good start to your answer, but few facts from the video and your solutions were all about controlling demand and not about helping with costs or controlling exchange rates or sanctions.
Sara A
Excellent answer and great use of facts from the video. well done.
You could have had a better introduction to get the higher grade (read Sam´s introduction).
Emeline C+
Good overall, but a bit short and you need to organise the final part of the answer better so that it flows when you read it.
Sam B
Good start to the answer with a nice introduction. But needed to refer more to the stats from the video (see sara´s answer)and the solutions needed to concentrate more on costs, subsidies and exchange rates and less on the demand factors.