Comments on: Inflation in the headlines! http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/ for students and teachers of AP and IB Economics Wed, 07 Jan 2009 14:20:36 +0000 http://wordpress.org/?v=2.7 hourly 1 By: Jessica http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4345 Jessica Sun, 02 Mar 2008 10:16:59 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4345 1. The US and Germany are both experiencing cost push inflation, as the prices are rising. On the other hand, China is experiencing demand pull inflation; it is a case where "too many people chase after too few goods." 2. An increase in energy prices causes inflation throughout the nation because energy is required in the manufacturing process. Basically, the cost of production increases for all goods, which makes the prices rise and inflation occurs. 3. With a lower interest rate, AD increases as well as investment. However, as AD increases, it may lead to demand-pull inflation because the demand is greater than the supply. 1. The US and Germany are both experiencing cost push inflation, as the prices are rising. On the other hand, China is experiencing demand pull inflation; it is a case where “too many people chase after too few goods.”

2. An increase in energy prices causes inflation throughout the nation because energy is required in the manufacturing process. Basically, the cost of production increases for all goods, which makes the prices rise and inflation occurs.

3. With a lower interest rate, AD increases as well as investment. However, as AD increases, it may lead to demand-pull inflation because the demand is greater than the supply.

]]> By: Dana Y. http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4327 Dana Y. Sat, 01 Mar 2008 11:48:53 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4327 As Peter Meister said, Germany is experiencing a cost push inflation as increase in energy prices drives up production and distribution costs on a wide variety of goods. Increased per unit production costs then lead to the AS curve to shift to the left. Moreover, United States is also experiencing a cost push inflation for similar reasons. However,China's inflation is hard to discriminate. Not only were supplies of coal reduced because of recent snowstorms, creating greater aggregate demand for such energy sources (demand pull inflation), but also because overall supply dwindled (cost push inflation). It is also interesting to point out that inflation has not only been occurring in those three countries, but internationally in the past few months. For example, the price of South Korea's staple emergency food, cup noodles, has increased just this week, raising a lot of complaints and controversy. Is this because of the impact of the US recession in a phenomenon called coupling? It is fascinating how everything in economics is interrelated. As Peter Meister said, Germany is experiencing a cost push inflation as increase in energy prices drives up production and distribution costs on a wide variety of goods. Increased per unit production costs then lead to the AS curve to shift to the left. Moreover, United States is also experiencing a cost push inflation for similar reasons. However,China’s inflation is hard to discriminate. Not only were supplies of coal reduced because of recent snowstorms, creating greater aggregate demand for such energy sources (demand pull inflation), but also because overall supply dwindled (cost push inflation). It is also interesting to point out that inflation has not only been occurring in those three countries, but internationally in the past few months. For example, the price of South Korea’s staple emergency food, cup noodles, has increased just this week, raising a lot of complaints and controversy. Is this because of the impact of the US recession in a phenomenon called coupling? It is fascinating how everything in economics is interrelated.

]]> By: Howard Lin http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4306 Howard Lin Fri, 29 Feb 2008 02:19:15 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4306 2) because when price of energy rises, even though is only such a little protion of house holds' expenditure, is major cost for production. When cost rises for a company, the price at which they will sell the good also rises, causing an inflation in the whole economy. 2) because when price of energy rises, even though is only such a little protion of house holds’ expenditure, is major cost for production. When cost rises for a company, the price at which they will sell the good also rises, causing an inflation in the whole economy.

]]> By: Claire M http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4300 Claire M Thu, 28 Feb 2008 16:31:49 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4300 They are experiencing cost-push inflation, which is caused by the increase in energy and food prices. Because energy is used on every type of machines or capitals to produce products. The government cannot cut taxes more because it would result to a recession. They are experiencing cost-push inflation, which is caused by the increase in energy and food prices. Because energy is used on every type of machines or capitals to produce products. The government cannot cut taxes more because it would result to a recession.

]]> By: Jessica Ng http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4289 Jessica Ng Thu, 28 Feb 2008 13:22:23 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4289 Europe is experiencing pretty much solely cost-push inflation as the rising energy prices lead to an increased per-unit cost of production, shifting the AS curve in. I think that China is experiencing both demand- pull and cost-push inflation. Aggregate demand is pushed out not only because of the expectations of future higher prices of the snow storm, but because of the generated wealth effect in China. At the same time, the snow storm causes the costs of maintenance and transportations to go up, thus bringing the prices up as well. The only difference is, because of that, the recession problem is not as serious in China. Europe is experiencing pretty much solely cost-push inflation as the rising energy prices lead to an increased per-unit cost of production, shifting the AS curve in.
I think that China is experiencing both demand- pull and cost-push inflation. Aggregate demand is pushed out not only because of the expectations of future higher prices of the snow storm, but because of the generated wealth effect in China. At the same time, the snow storm causes the costs of maintenance and transportations to go up, thus bringing the prices up as well. The only difference is, because of that, the recession problem is not as serious in China.

]]> By: Chan Min Park http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4275 Chan Min Park Thu, 28 Feb 2008 11:37:16 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4275 In Germany, it is cost-push inflation as we can see from "Energy prices are clearly the main driver of inflation." The costs are going up, the AS curve shifts to the left and price levels increase. Also in US "A jump in food and energy costs, rents and apparel prices." This is also na increase in costs and therefore input prices are going up. In China, the demand for supplies are increasing but there is not enough to go around. Therefore it is demand-pull inflation. An increase in energy means an increase in input prices and energy is used for almost all production. Therefore input prices are greatly rising and inflation is occuring. Cutting interest rates are done in order for more demand, as seen along the investment demand curve. However if inflation is occuring, lowering interest rates will not make it more profitable for firms to invest more. Therefore it is hard for the Fed to continue cutting interest rates. In Germany, it is cost-push inflation as we can see from “Energy prices are clearly the main driver of inflation.” The costs are going up, the AS curve shifts to the left and price levels increase. Also in US “A jump in food and energy costs, rents and apparel prices.” This is also na increase in costs and therefore input prices are going up. In China, the demand for supplies are increasing but there is not enough to go around. Therefore it is demand-pull inflation.

An increase in energy means an increase in input prices and energy is used for almost all production. Therefore input prices are greatly rising and inflation is occuring.

Cutting interest rates are done in order for more demand, as seen along the investment demand curve. However if inflation is occuring, lowering interest rates will not make it more profitable for firms to invest more. Therefore it is hard for the Fed to continue cutting interest rates.

]]> By: richardtu http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4263 richardtu Thu, 28 Feb 2008 03:02:58 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4263 Right now, China is experiencing demand pull inflation, the vast amount of consumers' demand are exceeding the current supply, therefore, pusing the price level up. On the other hannd, US and Germany are experiencing cost push inflation, becuase the per unit cost to produce a product is higher, therefore, reducing the supply to the market, which led to a increase in price level. These two are the essential inflation factors. Right now, China is experiencing demand pull inflation, the vast amount of consumers’ demand are exceeding the current supply, therefore, pusing the price level up.

On the other hannd, US and Germany are experiencing cost push inflation, becuase the per unit cost to produce a product is higher, therefore, reducing the supply to the market, which led to a increase in price level. These two are the essential inflation factors.

]]> By: optional.xu http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4234 optional.xu Tue, 26 Feb 2008 14:23:23 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4234 The US is experiencing a cost-push inflation as China experiences a demand pull one. Rising energy costs are a determinant of supply as they are an input. Thus, as cost of production increases so will prices of goods and services resulting in inflation. If the Fed cuts interest rates, true consumers will have more money to spend but then they are only fueling the fire for inflation. People have more money, but prices, due to high energy costs, will skyrocket. People have to pay more for the same amount of goods and inflation soars. The US is experiencing a cost-push inflation as China experiences a demand pull one.
Rising energy costs are a determinant of supply as they are an input. Thus, as cost of production increases so will prices of goods and services resulting in inflation.
If the Fed cuts interest rates, true consumers will have more money to spend but then they are only fueling the fire for inflation. People have more money, but prices, due to high energy costs, will skyrocket. People have to pay more for the same amount of goods and inflation soars.

]]> By: Christina Hu http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4227 Christina Hu Tue, 26 Feb 2008 13:01:19 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4227 2) It's because energy underlies virtually everything in our society. Everything a person consumes- from food to socks to television - had to use energy in its production at one point or another. Even if energy wasn't used in the production itself, the transportation of the good would definitely need energy. The government can't keep cutting interest rates because, if they do, the money people get back will be worth less and less. 2) It’s because energy underlies virtually everything in our society. Everything a person consumes- from food to socks to television - had to use energy in its production at one point or another. Even if energy wasn’t used in the production itself, the transportation of the good would definitely need energy.

The government can’t keep cutting interest rates because, if they do, the money people get back will be worth less and less.

]]> By: KatherineYang http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4224 KatherineYang Tue, 26 Feb 2008 11:04:55 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4224 The US is experiencing cost-push inflation, whereas China is experiencing demand-pull. Although China could also be experiencing cost-push though to a lesser extent than demand pull. Almost everything nowadays requires energy, therefore a rise in energy prices could easily lead to inflation. If the Federal Reserve cuts interest rates, then deman will increase and supply may not be able to keep up with the increases in demand. The US is experiencing cost-push inflation, whereas China is experiencing demand-pull. Although China could also be experiencing cost-push though to a lesser extent than demand pull.

Almost everything nowadays requires energy, therefore a rise in energy prices could easily lead to inflation.

If the Federal Reserve cuts interest rates, then deman will increase and supply may not be able to keep up with the increases in demand.

]]> By: Margaret Liu http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4221 Margaret Liu Tue, 26 Feb 2008 10:21:53 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4221 Germany and the US are experiencing cost-push inflation, while china is experiencing demand-pull AND cost-push. Hopefully china's booming economy can cover this double inflation. Energy is used for almost everything. Enough said. If the Fed continues to cut interest rates, inflation may increase to a level of demand beyond the amount that the US is able to supply. Germany and the US are experiencing cost-push inflation, while china is experiencing demand-pull AND cost-push. Hopefully china’s booming economy can cover this double inflation.

Energy is used for almost everything. Enough said.

If the Fed continues to cut interest rates, inflation may increase to a level of demand beyond the amount that the US is able to supply.

]]> By: kevinyeh http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4215 kevinyeh Mon, 25 Feb 2008 15:29:15 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4215 It's really quite interesting how an increase in aggregate demand can cause inflation. I mean it's pretty obvious in the US and Germany's case, that when AS goes down theres going to be inflation. That's pretty common sense. But in China's case, the inflation looks pretty largely due to demand pull. I would think that a huge increase in AD would lead to less inflation, but if its not accompanied by an increase in AS, inflation could skyrocket like it is in China It’s really quite interesting how an increase in aggregate demand can cause inflation. I mean it’s pretty obvious in the US and Germany’s case, that when AS goes down theres going to be inflation. That’s pretty common sense.
But in China’s case, the inflation looks pretty largely due to demand pull. I would think that a huge increase in AD would lead to less inflation, but if its not accompanied by an increase in AS, inflation could skyrocket like it is in China

]]> By: andyxu http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4200 andyxu Sun, 24 Feb 2008 10:07:00 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4200 As mentioned in the textbook, it is difficult to determine whether inflation, in which China is currently experiencing, is of the demand-pull or cost-push type. For example, the recent snowstorm in southern China may seem like an indication of a supply shock or cost-push category of inflation in which food supplies are in severe shortage. But put it in another way, the demand for food has outpaced its supply. Is this a demand-pull inflation? Therefore, the economic principles we learn in this class are not completely applicable in practice. As mentioned in the textbook, it is difficult to determine whether inflation, in which China is currently experiencing, is of the demand-pull or cost-push type. For example, the recent snowstorm in southern China may seem like an indication of a supply shock or cost-push category of inflation in which food supplies are in severe shortage. But put it in another way, the demand for food has outpaced its supply. Is this a demand-pull inflation?

Therefore, the economic principles we learn in this class are not completely applicable in practice.

]]> By: judychen http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4199 judychen Sun, 24 Feb 2008 10:06:25 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4199 US and Germany is experiencing cost- push as the price of energy and food are increasing. Whereas China is experiencing demand- pull inflation after the snowstorm, the demand for food is high while the supply is low. Rising energy prices results in inflation across the entire economy because energy is needed to produce anything. Therefore, the demand for energy is high and leads to an inflation. Because if Fed continue cutting interest rates, the consumption becomes higher so the price would be higher. Even though it makes recession better but it also causes demand- pull inflation since the aggregate demand becomes too high suddenly. US and Germany is experiencing cost- push as the price of energy and food are increasing. Whereas China is experiencing demand- pull inflation after the snowstorm, the demand for food is high while the supply is low.

Rising energy prices results in inflation across the entire economy because energy is needed to produce anything. Therefore, the demand for energy is high and leads to an inflation.

Because if Fed continue cutting interest rates, the consumption becomes higher so the price would be higher. Even though it makes recession better but it also causes demand- pull inflation since the aggregate demand becomes too high suddenly.

]]> By: Jack http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/comment-page-1/#comment-4195 Jack Sun, 24 Feb 2008 07:37:56 +0000 http://welkerswikinomics.com/blog/2008/02/21/inflation-in-the-headlines/#comment-4195 US and Germany's economies are going through inflation because of the increase in costs of energy and food. On the other hand, China's inflation is caused by demand because everyone wants to buy the products that were disturbed by the snow storm. Although the direct consumption of energy by consumers isn't very much, energy is the ultimate resource for producing other goods. So when the prices of energy goes up, it brings the prices of all goods up as well. US and Germany’s economies are going through inflation because of the increase in costs of energy and food. On the other hand, China’s inflation is caused by demand because everyone wants to buy the products that were disturbed by the snow storm.

Although the direct consumption of energy by consumers isn’t very much, energy is the ultimate resource for producing other goods. So when the prices of energy goes up, it brings the prices of all goods up as well.

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