The PPI measures prices for fuel, farm products (meats and grains), chemical products, and metals. Another measure of inflation is the Producer Price Index (PPI), which reports the price changes that affect domestic producers. Inflation erodes a consumer's purchasing power and can even interfere with the ability to retire. Companies also play a role in inflation, especially if they manufacture popular products. As the demand for a particular good or service increases, the available supply decreases. In indications of supply chain bottlenecks, wholesale price-based inflation was mostly benign this year, touching a low of (-) 3.37 per cent in May and a maximum of 3.1 per cent in January. The result is higher prices due to demand-pull inflation. For example, if an investor earned 5% from investments in stocks and bonds, but the inflation rate was 3%, the investor only earned 2% in real terms. Here, the scene on the New York Stock Exchange floor on Wednesday. Inflation can be a concern because it makes money saved today less valuable tomorrow.   Privacy While consumers experience little benefit from inflation, investors can enjoy a boost if they hold assets in markets affected by inflation. A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product. If foreign competition, for example, is unaffected by the production cost increases, their prices wouldn't need to rise. Expansionary fiscal policy by governments can increase the amount of discretionary income for both businesses and consumers. Demand-pull inflation occurs when the overall demand for goods or services increases faster than the production capacity of the economy. Inflation in the short run is most likely to result from an A Increase in, 118 out of 131 people found this document helpful. He warned US inflation could explode to double-digit levels before the end of next year. If the price increases that cause the PPI to spike get passed onto consumers, it will be reflected in the Consumer Price Index. If inflation is occurring, leading to higher prices for basic necessities such as food, it can have a negative impact on society. Inflation Is Likely To Result From: Multiple Choice Lower Demand By Consumers. INFLATION is likely to make a comeback in 2021 after a deflationary trend this year as the Covid-19 pandemic supressed demand for goods and services. Expansionary monetary policy by central banks can lower interest rates. Inflation is a decrease in the purchasing power of money, reflected in a general increase in the prices of goods and services in an economy. If profit margins are rising, it means the prices that companies charge for their products are increasing at a faster rate than increases in production costs. However, companies can also be hurt by inflation if it's the result of a surge in production costs. Cost-push inflation is caused by a decrease in aggregate supply. CPI inflation picks up to materially above the MPC’s 2% target by the end of the forecast period. For example, if a hurricane destroys a crop such as corn, prices can rise across the economy since corn is used in many products. Try our expert-verified textbook solutions with step-by-step explanations. Course Hero, Inc. The result is higher prices for consumers without any change in demand for the products consumed. Deflation, Not Inflation, is Likely To Result From Current Commodity Price Hikes Trenton, NJ (PRWEB) September 20, 2005 -- If you are old enough to remember the America of the 1970s, then you probably remember those inflationary days when Don't use plagiarized sources. Companies, in turn, increase wages to attract qualified candidates, causing production costs to rise for the company. It is a consequence of the relative weight shifts, and particularly driven by the relative increase in consumption of “Food & Non-Alcoholic Beverages”, which are more inflationary than other spending categories. Central banks of developed economies, including the Federal Reserve in the U.S., monitor inflation. Inflation is a measure of the rate of rising prices of goods and services in an economy. There are a few metrics that are used to measure the inflation rate. Many service industries are … When there's a surge in demand for goods across an economy, prices increase, and the result is demand-pull inflation. There are various factors that can drive prices or inflation in an economy. The housing market, for example, has seen its ups and downs over the years. The increase in money available throughout the economy leads to more spending and demand for goods and services. Cost-push inflation happens as a result of an increase in the cost of production. 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