• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Commentary of Phillipine Inflation due to accelerated growth

Extracts from this document...


COMMENTARY COVERSHEET Economics commentary number: SL Number 4 Title of extract: Philippine Inflation Probably Accelerated as Growth Quickened Source of extract: Bloomberg Date of extract: 8th September 2007 Word count: 748 Date the commentary was written: 10th September 2007 Sections of the syllabus to which the commentary relates: 3 Candidate name: Ebrahim Yusuf Abdulrasul Palkhi Candidate number: ARTICLE: (http://www.bloomberg.com/apps/news?pid=20601080&sid=aobiGDrtYoRM&refer=asia) Philippine Inflation Probably Accelerated as Growth Quickened By Clarissa Batino and Michael Munoz Sept. 4 (Bloomberg) -- Philippine inflation probably accelerated in August after sales of homes, mobile phones and fast-food spurred the fastest economic expansion in almost two decades in the second quarter. Consumer prices rose 2.7 percent from a year earlier, according to the median estimate of 13 economists surveyed by Bloomberg News. Inflation was 2.6 percent in July, close to a 7 1/2-year low of 2.2 percent. The National Statistics Office report is due at 9 a.m. tomorrow in Manila. ``Inflation is on its way up, which means interest rates may also rise,'' said Sergio Edeza, treasurer at Rizal Commercial Banking Corp. ...read more.


Due to the lowering of interest rates by the Philippine authorities, the aggregate demand in the economy increases, which is depicted by the shift outwards of the AD curve from AD1 to AD2. This leads to economic growth where the real output increases from Y1 to Yf, however it also leads to an increase in the average price level from P1 to P2, and hence the AD shift is inflationary. At the moment, inflation rate is 'manageable' and any interference in the market may hamper the goal of achieving economic growth. However, it is predicted that 'Philippines' $117 billion economy may expand 7.1% this year', which 'exceeds the forecasts of the government' which is embarking on new projects and hence planning to inject money into the economy. This may turn into a dangerous situation for Philippine, if the economy is already at full employment level. Any increases in spending may turn out to be pure inflationary. Figure 2: Demand-Pull inflation- At Full Employment Level of Output In the diagram above we can see that the economy is at full employment level where AD1 cuts the LRAS curve at point A. ...read more.


A few of the supply-side policies include reduction in income taxes to provide incentive to workers to work harder, eliminating minimum wages, reducing unemployment benefits to push the unemployed to find work and privatisation of public firms so as to improve efficiency. However, these policies have drawbacks too, some of which include the fact that they take a long time to kick in, can reduce government revenue and reduce considerably living standards of the poor. Therefore, it is a necessity for the Philippine government to strike the right balance between which supply-side policy to use, and when to curb the aggregate demand in the economy. Definitions: a) Economic growth is a steady process by which the productive capacity is increased over a period of time( economics course companion) b) unemployment is "people of working age who are without work, available for work and actively seeking employment" (www.ilo.org) c) Inflation is a sustained increase in the general price level.( http://www.bized.co.uk ) d) Monetary policies are ones that use the level of the money supply and interest rates to influence the level of economic activity. ( http://www.bized.co.uk ) ?? ?? ?? ?? ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Commentary on Indian News Article "Food prices push inflation to 6.95%"

    All of these changes eventually lead to demand-pull inflation. Figure 2 illustrates cost-push inflation. The economy experiences a rise in costs of production due to an increase in the costs of raw materials in the agriculture market creating cost-push pressures.

  2. Economics commentary - The economic crisis caused deflation in 2009, but consumer price levels ...

    Policy has focused mainly on exports, with imports given little attention. ii) US dollar -the sustained appreciation of the dollar relative to the euro has increased many import costs, feeding into the overall inflation. Ever since the launch of the Euro, it has been in steady decline against the US

  1. Economics article commentary. June Harvest to Reduce inflation

    Figure 1 DD and S1S1 are the original demand and supply curve respectively. A drought will cause a shortage that will make the supply curve to shift to the left, that is, to S2S2 and price to rise from P1 to P2 as quantity decreases from Q1 to Q2.

  2. Is it possible to reduce unemployment without increasing inflation

    The latter, in turn, can happen if there are exogenous causes like government intervention or the existence of too powerful trade unions. Both types of " exogenous distortions" would prevent the functioning of a free, effective and efficient market that in the long term would clear the labour excess of supply through the adjustment of the price of labour, i.e.

  1. Article analysis. The article I chose is about the recent rise in inflation ...

    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 the average price level. In the diagram, if AD1 shifts to AD2, the output and the price will change with it.

  2. IB economics commentary - Inflation

    In contrast, rising prices of food items strain their discretionary spending,? the report said. Higher food prices should be an incentive to enhance the production of food items, but this has not happened so far. In addition to price signals, productivity improvement in food/agriculture categories would require better technology and improved investments in irrigation.

  1. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    troops into the American labor force with flying colors. Having a bundle of financial incentives to learn, invest and build a company greatly enhance the labor force and the production it entailed. The American workforce changed significantly. During the 1950s, the number of workers providing services grew until it equaled and then surpassed the number who produced goods.

  2. What is driving the Philippines' surprisingly strong growth

    It is estimated that 11% of the population of 92 million work overseas. Remittances account for about 10% of the country's GDP, which totaled $225 billion in 2011. Because Filipinos head to a wide variety of countries to work, the diversity protects them from the full impact of regional economic troubles.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work