The Theory and Policy of Macroeconomics on Inflation Rate: [Essay Example], 401 words GradesFixer
This essay has been submitted by a student. This is not an example of the work written by professional essay writers.

The Theory and Policy of Macroeconomics on Inflation Rate

downloadDownload printPrint

Pssst… we can write an original essay just for you.

Any subject. Any type of essay.

We’ll even meet a 3-hour deadline.

Get your price

121 writers online

Download PDF

Macroeconomics also referred to as Keynesianism, is a branch in economics that deals with the structure, behaviour .performance and decision making of an economy as a whole microeconomics. Economists study the aggregate indicators in the economy such as the Gross Domestic Product (GDP), the price index, unemployment rates, inflation and other interrelations that exist among the different sectors of the economy (Dwivedi, 2010). In our discussion we are going to consider the historical sources of inflation rate in the study of macroeconomics.

In economics, inflation as defined as the sustained increment in the general price level of the services and goods produce in an economy over a particular period of time. This means that the value of money will decline i.e. the loss of purchasing power per unit of money. Inflation rate is used as the chief measure of inflation where the percentage change in the price index over a period time is calculated on yearly basis. Historical inflation rate records and Consumer price index has been used by different economies to represent inflation data. Economies are able to compare the growth rate of one period to another. In consumer price index, some of the factors used in the determination of inflation are:

Fiscal imbalances

This kind of imbalances can either trigger faster growth of money or imbalance of payments hence forcing depreciation in the exchange rate thus leading to increase in inflation.

Overheating economy

Inflation is caused by an activity variable such as an output gap in the economy.

Cost shocks

This category is concerned with movement of prices of some sensitive goods in the economy. A good example is in the case of petrol, any alteration in price leads to aggregate change in the price level of all other commodities (Griliches, 2010).

Historical inflation rate majorly keeps records of the information obtained from the CPI to help in decision in future. Lastly, inflation forecast has been of importance in the economies where it has been applied in the following ways: Through inflation forecasting the government may know the appropriate time to offer inflation indexed bonds to its investors.

By analysing of market variables such as price, Inflation forecasting will help in improving of the quality of surveys and also enhance the understanding of the process of forecast formulation in an economy. Lastly, Reserve Banks monetary forecasting on households gives a measure of sentiment of inflation expectations in order to feed into the monetary policy process.

infoRemember: This is just a sample from a fellow student.

Your time is important. Let us write you an essay from scratch

100% plagiarism-free

Sources and citations are provided

Find Free Essays

We provide you with original essay samples, perfect formatting and styling

Cite this Essay

To export a reference to this article please select a referencing style below:

The Theory and Policy of Macroeconomics on Inflation Rate. (2018, October 26). GradesFixer. Retrieved May 14, 2021, from
“The Theory and Policy of Macroeconomics on Inflation Rate.” GradesFixer, 26 Oct. 2018,
The Theory and Policy of Macroeconomics on Inflation Rate. [online]. Available at: <> [Accessed 14 May 2021].
The Theory and Policy of Macroeconomics on Inflation Rate [Internet]. GradesFixer. 2018 Oct 26 [cited 2021 May 14]. Available from:
copy to clipboard

Sorry, copying is not allowed on our website. If you’d like this or any other sample, we’ll happily email it to you.

    By clicking “Send”, you agree to our Terms of service and Privacy statement. We will occasionally send you account related emails.


    Attention! this essay is not unique. You can get 100% plagiarism FREE essay in 30sec

    Recieve 100% plagiarism-Free paper just for 4.99$ on email
    get unique paper
    *Public papers are open and may contain not unique content
    download public sample

    Sorry, we cannot unicalize this essay. You can order Unique paper and our professionals Rewrite it for you



    Your essay sample has been sent.

    Want us to write one just for you? We can custom edit this essay into an original, 100% plagiarism free essay.

    thanks-icon Order now

    Hi there!

    Are you interested in getting a customized paper?

    Check it out!
    Having trouble finding the perfect essay? We’ve got you covered. Hire a writer uses cookies. By continuing we’ll assume you board with our cookie policy.


    Haven't found the right essay?

    Get an expert to write you the one you need!


    Professional writers and researchers


    Sources and citation are provided


    3 hour delivery