Scribd
Upload
16 views

Applied Economics

This document is a student paper on the high inflation rate in the Philippine economy. It discusses the current inflation rate in the Philippines of around 8.6-8.7% and examines the causes of inflation including demand-pull, cost-push, and built-in inflation. The effects of high inflation are outlined such as a reduction in purchasing power and disproportionate impacts on lower-income consumers. The government fights inflation through programs like Kadiwa and contractionary monetary policy. Alternative solutions proposed include careful price controls, moderate long-term interest rates, and clear communication of inflation goals.

Uploaded by

hayenmack
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
16 views

Applied Economics

This document is a student paper on the high inflation rate in the Philippine economy. It discusses the current inflation rate in the Philippines of around 8.6-8.7% and examines the causes of inflation including demand-pull, cost-push, and built-in inflation. The effects of high inflation are outlined such as a reduction in purchasing power and disproportionate impacts on lower-income consumers. The government fights inflation through programs like Kadiwa and contractionary monetary policy. Alternative solutions proposed include careful price controls, moderate long-term interest rates, and clear communication of inflation goals.

Uploaded by

hayenmack
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

Medroso – Mendoza National High School

Binanuaanan Pequeño Calabanga Camarines Sur

S/Y 2022 – 2023

High Inflation Rate in

Philippine Economy

(Performance task in
Applied Economics)

Submitted by

Hayen, Mark Stephen E.

Grade 12 - Barba

Submitted to

Ms. Joan DG. Barba

Teacher

INTRODUCTION
One of the most problem here in Philippines is the inflation. Inflation is a general and ongoing
rise in the level of prices in an entire economy, or which can be translated as the decline of purchasing
power over time. Inflation means that there is pressure for prices to rise in most markets in the economy.
In addition, price increases in the supply-and-demand model were one time events, representing a shift
from a previous equilibrium to a new one.

STATEMENT OF THE PROBLEM

This study will determine the solutions in the High Inflation Rate in the Philippines.

Specifically , it sought the following question:

1. What is the inflation rate of the Philippines?


2. What are the cause/s of inflation?
3. What are the effects of inflation?
4. How does the government fight inflation?
5. What are the alternative solutions to fight High inflation rate in Philippines?

WHAT IS THE INFLATION RATE OF THE PHILIPPINES?

The Philippine Statistics Authority reported that the country’s inflation rate marginally slowed
down to 8.6% in February 2023 from 8.7% in January 2023, as price increase of certain food
commodities and energy eased.

Below is a data of inflation from year 2019 – 2023 by rateinflation.com Philippines.


Philippines inflation rate for April 2023 was 6.6%, a 2.1% decrease from January 2023. The
average headline inflation for 2022 reached 5.8%, higher than the 3.9 percent posted in 2021, a 1.5%
increase from 2020. Philippines inflation rate for 2020 was 2.4 %, a 0% increase from year 2019 with
also 2.4% inflation rate.

WHAT ARE THE CAUSES OF INFLATION?


There are three main causes of inflation:

Demand – pull inflation. Refers to situations where there are not enough products and services
being produced to keep up the demand, causing their prices to increase.

Cost – push inflation. Occurs when the cost of producing products and services rises, forcing
business to increase their prices.

Built – in inflation. (Which is sometimes referred to as wage – price spiral) occurs when
workers demand higher wages to keep up with rising living costs. This in turn causes businesses to raise
their prices in order to offset their rising wage costs, leading to a self reinforcing loop of wage and price
increase.

WHAT ARE THE EFFECTS OF INFLATION?

The following are the main effects of High inflation in an economy.

Inflation erodes purchasing power. This is inflation’s primary and most pervasive effect. An
overall rise in prices over time reduces the purchasing power of consumers since a fixed amount of
money will afford progressively less consumption.

Inflation disproportionately impacts lower – income consumers. Lower income consumers tend
to spend a higher proportion of their income on necessities than those with higher incomes. This means
they have less of a cushion against the loss of purchasing power inherent in inflation.

Inflation raises interest rates. The approach has been to manage inflation using monetary policy
over the past century. When inflation threatens to exceed a central banks target (typically 2% in
developed economies, and 3% to 4% to emerging ones), policy makers can raise the minimum interest
rates, driving borrowing costs higher across the economy by constraining the money supply. As a result,
inflation and Interest rate tend to move in the same direction. By raising interest rates as inflation rises,
central banks can dampen the economy’s animal spirit or the risk appetite, and the attendant price
pressures.

HOW DOES THE GOVERNMENT FIGHTS INFLATION?

Kadiwa program. The Kadiwa program is a farm-to-consumer market chain that eliminates
intermediaries, allowing local producers to generate higher income by selling their produce directly to
consumers.

Contractionary Monetary Policy. Governments may pursue a contractionary monetary policy,


reducing the money supply within an economy. The U.S. Federal Reserve implements contractionary
monetary policy through higher interest rates and open market operations.

Price control. Price control is an economic policy imposed by governments that set minimums
(floors) and maximums (ceilings) for the prices of goods and services in order to make them more
affordable for consumers.

As an economic expert I have my own alternative solution to fight “High Inflation Rate “ here in
the Philippines.

ALTERNATIVE SOLUTIONS FOR HIGH INFLATION RATE


Price control should be carefully focused to maintain low prices and to make the goods and
services more affordable to them.

Include moderate long term interest rates, price stability and maximum employment. Each of
these goals is intended to promote a stable financial environment. The federal reserve clearly
communicates long term inflation goals in order to keep a steady long term rate of inflation, which is
thought to be beneficial to the economy.

You might also like