Article analysis. The article I chose is about the recent rise in inflation in Hong Kong which mainly accelerated the food prices and the private housing rents.

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The article I chose is about the recent rise in inflation in Hong Kong which mainly accelerated the food prices and the private housing rents. The article highlights the assumptions that economists and the government of Hong Kong has made of the level of inflation in the next few months. The article focuses on the percent rise in the consumer price index in the past few months.

Inflation is defined as a general rise in the prices of goods and services in an economy. The government has predicted the inflation to elevate in the short term, which is defined as, relating to or maturing within a short period of time, usually twelve months. The consumer price index is the official measure of inflation in a country.  Hong Kong’s CPI has risen by 5.6% in one year which consists of the prices of food and property which are the major drivers of inflation.

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As it states in the article, the reason for this rise in inflation is strong domestic demand.  This rise in aggregate demand, which is the total demand for goods and services produced in an economy over a period of time, has caused demand pull inflation in Hong Kong, which occurs when the demand exceeds the supply in an economy. This is shown in ‘Figure 1’.

        

Figure 1 shows demand-pull inflation in Hong Kong where an increase in aggregate demand leads to an increase in ...

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