Unit-10-Deflation-vs-Inflation-财经专业英语教程(第四版)课件.ppt

单击此处编辑母版标题样式,单击此处编辑母版文本样式,第二级,第三级,第四级,第五级,*,*,Deflation vs Inflation,Unit 11,Deflation Is Very Damaging,Para 1,In the MPC,s last monthly inflation report they forecast that inflation could fall to 1,%.,They even hinted at the possibility of deflation.What is deflation and why does it strike fear into economists and policy makers?,Para 2,Deflation is simply a fall in the general price level.If this deflation is a result of improved productivity and greater efficiency,it could be benign.But,usually deflation is caused by falling demand and lower growth.,It is no coincidence that our worst period of deflation was in the great depression of the 1930s,.This kind of deflation is very damaging because:,Para 3,Lower Spending.,When prices are falling,there is an incentive to delay purchases.Why buy a TV now,when it will be cheaper in 12 months?Look at how the housing market is suffering because of falling prices.Nobody wants to buy with falling house prices;this is why property transactions have slumped and of course causes further falls in prices.In Japan,the decade of deflation created a culture of thrift and saving.Japanese housewives just wouldnt spend.Tax cuts,government spending and interest rate cuts all failed to stimulate growth because all the Japanese wanted to do was save(,an example,of the Paradox of thrift,),Para 5,Increasing Burden of Debt,.If you take out a mortgage and make mortgage payments of say 500 a month,inflation will progressively reduce the real value of your mortgage interest payments.High inflation thus makes a mortgage more attractive,over time,it increases the disposable income of mortgage owners.,Para 6,However,with deflation,this 500 a month becomes a bigger%of your disposable income,.In deflation,debt becomes an increasing burden reducing spending and economic growth.,Para 7,The problem is that the UK and US are increasingly indebted,personal savings are very low.Personal debt is very high therefore,deflation would be very damaging for an economy burdened with a legacy of debt.,How to Overcome Deflation,Para 9,Basically,monetary authorities need to implement bold policies.In particular they need to increase inflationary expectations.,The problem is Central banks are so used to trying to reduce inflationary expectations,that they can struggle to implement the opposite,.However,the experience of Japan in the 1990s and 2000s suggests timid policies can lead to several years of economic stagnation.,Economics Costs of Inflation,1.Menu costs.,Para 10,This is the cost of changing price lists e.t.c.However with modern technology this is less significant these days.E.g.Computerised bar codes make it easier to update.,3.Lower Competitiveness,Para 12,High inflation in the UK makes the UK less competitive compared to other countries.This will reduce demand for UK goods,causing lower growth and possibly balance of payments problems.This is increasingly important with the globalisation of the world economy.If we do lose competitiveness in the long term it is likely to lead to devaluation of the UK exchange rate.,5.Inflation reduces the value of savings.,Para 14,This is because inflation erodes the value of money.This is likely to effect pensioners the most.Therefore inflation is thought to cause a redistribution of income within society from savers to borrowers.However this is only a problem if inflation is higher than the rate of interest.If interest rates are above the value of inflation then savers can still maintain the value of their savings.(so long as they don,t keep it in cash under their bed).This is not really a significant problem in the UK.Real interest rates usually remain positive.,6.Shoe leather costs.,Para 15,This is the cost of looking around for the best deal.When inflation is high it becomes more difficult to know best deals,.However this is only really a problem for very high levels of inflation.,Para 17,Is Deflation a possibility?Deflation is a fall in the general price level.It is quite rare amongst Western Economies.The last serious period of deflation was during the Great Depression of the 1930s(though Japan experienced deflation during 90s and 00s).,Para 18,Deflation usually occurs because of a serious economic slowdown.If the present slowdown in economic growth turned into a major recession,deflation could become a real possibility.Deflation could occur because of:,Falling house prices reducing spending,Falling value of shares,Contraction in investment caused by banks being unwilling or unable to lend.,Falling economic growth causing firms to try cut prices and possibly wages.,Para 19,Deflation is generally considered to be very harmful for the economy as it exacerbates any recession through discouraging further spending(During periods of deflation people delay purchases because they think they will be cheaper in the future.),Para 20,However,at the moment,deflation is unlikely.,We have cost push inflation,and economic activity would need a very large decline before defla。