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Need help on inflation asap!! (1 Viewer)
- Thread starter maamay
- Start date
Cleavage
Clarence
- Joined
- Sep 1, 2013
- Messages
- 563
- Gender
- Male
- HSC
- 2014
- Uni Grad
- 2018
For trade flows;
Inflation weakens Australia's international competitiveness, purely because prices are less-competitive in the global market, which may not be experience the same inflationary pressures. Domestic consumers may also purchase 'uninflated' imports to substitute for their inflated domestic counterparts.
For financial flows;
Inflation increases production costs, such as wages, which result in business being less profitable. As such, overseas investors are dissuaded from investing in the Australian economy.
Inflation also reflects an inherent inability of the economy to implement counter-cyclical policy, because inflation reflects rampant aggregate demand. A country which cannot control inflation in the long term damages prospects of obtaining the greatest profit from investment. As such, capital inflows are dissuaded.
Inflation weakens Australia's international competitiveness, purely because prices are less-competitive in the global market, which may not be experience the same inflationary pressures. Domestic consumers may also purchase 'uninflated' imports to substitute for their inflated domestic counterparts.
For financial flows;
Inflation increases production costs, such as wages, which result in business being less profitable. As such, overseas investors are dissuaded from investing in the Australian economy.
Inflation also reflects an inherent inability of the economy to implement counter-cyclical policy, because inflation reflects rampant aggregate demand. A country which cannot control inflation in the long term damages prospects of obtaining the greatest profit from investment. As such, capital inflows are dissuaded.