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Economy - Types, factors and effects of inflation in Malaysia

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General public
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accounting
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UUM

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documents in English
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21 pages
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  1. Types of inflation
    1. Creeping Inflation
    2. Walking Inflation
    3. Galloping Inflation
    4. Hyperinflation
    5. Stagflation
    6. Demand-pull inflation
    7. Cost-Push inflation
  2. Factors of inflation
    1. Inflation
    2. Gross Domestic Product
    3. Government Expenditure
    4. Imported Goods and Services
    5. Interest Rate
    6. Money Supply
  3. How to prevent inflation
    1. Contractionary Monetary Policy
    2. Reserve Requirements
    3. Fiscal Policy
    4. Reducing Money Supply
  4. Effects of inflation
    1. Negative inflation
    2. Positive Effect

In the economy, inflation means an increase in the general price of goods and services in an economy from time to time. G. Ackley defined inflation as ?a persistent and appreciable rise in the general level or aver­age of prices'. With the increase in general price levels, each unit of currency can only buy goods and services in lesser quantities than ever before. Therefore, inflation also reflects the decline in purchasing power, which is a loss of real value in internal exchange medium of an economy. High inflation may lead to a shortage of goods when consumers begin hide items because worries about prices will rise in the future.

[...] So, spending drops, prices drop and inflation slows. Diagram 5 Source: www.mrmedico.info Malaysian government conducts the nation's monetary policy by changing interest rates and adjusting the quantity of money. Malaysia's central bank, Bank Negara Malaysia uses interest rate targeting for the time being. By using monetary policy, BNM can increase or decrease the money supply as well as the interest rate. BNM will set monetary policy based on different economic situation whether inflation or recession, by increase or decrease the interest rate in order to achieve macroeconomic objectives. [...]


[...] Since they have less money to lend, they increase the interest rate. With the higher interest rate, fewer people and institutions borrow money or borrow less money. Additionally because of the higher interest rates more people and institutions deposit money in banks to profit off of higher interest. In the short term, this means that businesses and people are spending less of their money which slows down growth. If there is not a lot of spending then prices do not rise as much. [...]


[...] The high Malaysian economic recovery rate, above 8 per cent per annum since the last eight years, has given rise to high inflationary pressures in Malaysia. The inflation rate has risen from 0.4 per cent in 1985, when Malaysia multiplies the economies of the economy to 4.7 per cent in 1992. However, the inflation rate dropped to 3.5 per cent in 1995 and 3.6 per cent for the first nine months of 1996. So far the rate of inflation in Malaysia is still low and is lowest compared to other developing countries. [...]


[...] For instances, expansionary fiscal policy will be use during recessions, which is tax cuts and increased government spending in order to increase demand and economic growth while contractionary policy will be use during booms, which is increased taxation and lower government spending to reduce demand and reduce inflation. Here are some examples of how the Malaysian government has set fiscal policy. In a recession, the government may decide to increase borrowing and spend more on infrastructure spending. The idea is that this increase in government spending creates an injection of money into the economy and helps to create jobs. There may also be a multiplier effect, where the initial injection into the economy causes a further round of higher spending. [...]


[...] Retrieved fromhttp://www.theedgemarkets.com/article/negative- headline-inflation-ahead-transitory-nature Appendices Group's Name : Group 2 Subject : BEEB 2033/Group B (A181) Lecturer : Date Discussion Comment Lecturer's signature whether the topic we topic is right and choose is correct. we need to get the We also give the information from whole all subtopics journal that we want to include in assignment roughly types, effect and specifics the how to prevent the information, need inflation to do the inflation in Malaysia. about a factor of add some more of inflation is right the information or wrong. from the article report to dr. [...]

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