Engleza pentru afaceri

Trimis la data: 2010-01-11
Materia: Engleza
Nivel: Facultate
Pagini: 21
Nota: 5.22 / 10
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Autor: Marina Andrei
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Inflation hits economies in transition hard because price liberalization - the removal of government control of prices - is an essential step towards a market economy. The initial result of such price liberalization is predictable - a wave of price increases for goods that were in chronic short supply. Why? Because the government held their prices artificially low, so demand perennially outstripped supply, or because of other economic distortions and inefficiencies created by government decision-makers. In addition, if people are holding large amounts of money at the time of this transition (since there was little of value to buy) the pressure of inflation can be even greater.
Will inflation remain one of the most intractable problems confronting societies in transition from centralized to free market economies? It will be, however, a challenge that such societies must meet if they are to enjoy the material benefits that a market economy can provide.
Inflation is an increase in the average price level of the goods and services produced and sold in an economy.

Inflation typically occurs in a market economy for on of two reasons: either people increase their spending faster than producers are able to increase the supply of the goods and services; or there is a decrease in the supply of goods and services to consumers and/or producers, which drives up prices. Inflation has sometimes been described as an increasing amount of money chasing a shrinking number of goods.

Inflation hits economies in transition hard because price liberalization - the removal of government control of prices - is an essential step towards a market economy. The initial result of such price liberalization is predictable - a wave of price increases for goods that were in chronic short supply. Why? Because the government held their prices artificially low, so demand perennially outstripped supply, or because of other economic distortions and inefficiencies created by government decision-makers.

In addition, if people are holding large amounts of money at the time of this transition (since there was little of value to buy) the pressure of inflation can be even greater.

Nevertheless, the rewards of enduring the inevitable bout of inflation during this transitional period are substantial. Unfettered by government, the market mechanisms of supply and demand will begin to function. High prices signal strong demands and the market, albeit slowly and haltingly at first, responds with increased production. People's money may have lost value, but what money they have is now real and consumers can buy the goods that are beginning to appear in stores. With supply increasing, prices stabilize and queues begin to disappear as consumers realize that more and varied products will continue to be available for sale.

Entrepreneurs and investors eager to benefit from the new economic freedom are going to start new business and compete to provide goods and services. Thus more jobs will be created while prices will moderate further.

The key element in this transition is for the government to relinquish its role in setting prices and permit the market forces of supply and demand to establish prices for virtually all goods and services. When such a free market is established, inflation may persist, but it is a far more manageable and less threatening problem than in the early, hard days of economic transition."

"Monetary policy is how the government tries to improve the country's economy by using banks and money, acting on the level of deposits and loans, and on interest rates and exchange rates.

As well as keeping inflation low, a government will seek to keep unemployment low and output rising. However, it cannot do all three things at the same time. For instance, if it is very successful in lowering unemployment, the shortages of workers may cause wages to rise, as employers bid for more employees. The workers will spend their increased wages in the shops and this may cause prices to rise - thereby causing inflation to rise.

A government may have to choose therefore between these aims or goals. Mrs. Thatcher's government (in office between1979 - 1990) chose the reduction of inflation as the goal which should be given the utmost priority. Unemployment, economic growth and the enormous gap between exports and imports were not considered so important."
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