English IV

Article (Inflation)
Is Related By Cause and Result
Mrs. Dien Mardiana, S.S., M.Pd.

Prepared By :
Siti Rohana (2013050462)

563/04SMJMI

PAMULANG UNIVERSITY
2014

Preface
First at all give thanks for Allah SWT and grace for us. Thanks to Allah SWT for
helping me and give me chance to finish this assignment timely. And I would like to say
thank you for Mrs.Dien Mardiana,S.S, M.Pd as the lecture that always teaches us and give
much knowledge about how to practice English well.
The paper English assignment entitled Inflation be related by (Cause and Result) to
complete the English task. I realized this assignment is not perfect, but I hope it can be
useful for us. Critics and suggestion is needed here to make this assignment be better .
Hopefully we as a student in University Pamulang can work more professional by using
English as the second language what ever we done. Thank you.

Pamulang,

Januari 2015

Author

Table of Contents
English IV..........................................................................................................................1
Article (Inflation)...............................................................................................................1
Preface.....................................................................................................................................i
Chapter I Introduction............................................................................................................1
1.1 Background..................................................................................................................1
1.2 Problem Formulation...................................................................................................1
1.3 Destination...................................................................................................................2
Chapter II Discussion.............................................................................................................3
2.1 Definition of Inflation..................................................................................................3
2.2 Types of Inflation.........................................................................................................3
2.3 Theories of Inflation....................................................................................................4
2.4. Causes of Inflation......................................................................................................5
2.5. Impact of Inflation......................................................................................................6
2.6 How to Overcome Inflation.........................................................................................7
2.7 The Pictrure.................................................................................................................9
Chapter III The Characteristic..............................................................................................17
Modifiers Cause and Result..........................................................................................17
Chapter IV Closing...............................................................................................................19
4.1 Conclussion...............................................................................................................19
4.2 Suggestion.................................................................................................................19
References............................................................................................................................20

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Chapter I
Introduction
1.1 Background
In management science, inflation is a process of rising prices in general and continuous
(continuous) with regard to market mechanisms that can be caused by various factors,
among others, increased private consumption, excess liquidity in the market which triggers
consumption or even speculation, to include also due to the presence of disfluencies
distribution of goods. In other words, inflation is also a process of decline in currency
values continuously. Inflation is the process of an event, not a high-low level of prices.
That is, the perceived high price level is not necessarily indicate inflation. Inflation is an
indicator to see the rate of change, and is considered to occur if the price increase takes
place continuously and the interplay of influence. The term inflation is also used to mean
an increase in money supply which is sometimes seen as the cause of rising prices. There
are many ways to measure the rate of inflation, the two most commonly used are the CPI
and the GDP deflator.
In times of inflation the purchasing power of money decreases. Deflation is the opposite of
inflation. Deflation means a decrease in the price of goods and services in general. This can
lead to sluggishness in the world economy. While the Consumer Price Index (CPI) is an
index that provides information on the development of the average change in prices fixed
group of goods or services that are generally consumed by households within a certain
period of time. CPI change from time to time describe the rate of increase (inflation) or the
rate of decline (deflation) the price of the goods or services the needs of everyday
household.

1.2 Problem Formulation

Dealing with limitation of the problem, the author would like to formulate the problem as
follow:
1. What is the definition of Inflation ?
2. What is the types of inflation ?
3. What is the Cause of Inflation ?
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4. How is the classification of an inflation ?

5. How to measure inflation
6. What are the effects of inflation
1.3 Destination
General Purpose :
That students and readers understand the importance of English language in the life
Special Purpose :
- To know about the causes and result of inflation
- To know the definition of inflation

Chapter II
Discussion

2.1 Definition of Inflation

The increase in the price of goods can be temporary or ongoing. When the increase
lasts for a long time and occurs in almost all goods and services, then this phenomenon is
called inflation. So, the price increase on one or two types of goods can not be categorized
as inflation.
Thus, inflation (inflation) is the increase in the price of goods that are common and
persistent. The opposite of inflation is deflation (deflation), a condition in which the price
level has decreased continuously.

2.2 Types of Inflation

Types of inflation can we distinguish based on its severity, causes, and based on the origin.
1. Inflation Based on severity

Low inflation. Inflation is said to be low if the price goes very slowly with a small
percentage, ie below 10% a year.

Moderate inflation. A country is said to have moderate inflation, if the percentage

rate of inflation was 10% - 30% a year.

High inflation. Inflation is said to be high if the rate of inflation is 30% - 100% a
year.

Hyperinflation. Hyperinflation could occur if the inflation rate over 100% a year. If
a country is experiencing hyperinflation, the people no longer have confidence in
money, they prefer to exchange it for a particular item.

2. Inflation Based cause

Inflation can also be distinguished based on the cause, namely:

Demand-pull inflation
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Cost-push inflation

3. Originally Inflation Based

Based on the origin of inflation can be divided into the following.

Inflation due to the budget deficit. This type of inflation occurs as a result of
growth in the money supply exceeds the demand for money.

Imported inflation. Imported inflation is inflation that occurred in a country, for

example some goods abroad is a factor of production in a country, the price
increases, the increase in the price rise in the price of goods in the country.

2.3 Theories of Inflation

The symptoms of inflation can be explained by theories of inflation.
1. Theory quantity (Irving Fisher)
According to the quantity theory, if the money supply increases, the general price
level will rise. A direct relationship between the price and the quantity of money as
represented by the simple quantity theory of money can be used to explain the
inflation situation.
2. Theory Keynes
According to Keynes, inflation occurs because there are some people who want to
live beyond its economic capabilities. Inflation process is part of the process of the
struggle for sustenance among social groups who want a bigger share of that could
be provided by the community.
3. Theory Structuralists
This theory gives great attention to the structure of the economy in developing
countries. Inflation in developing countries is mainly due to the factors of economic
structure. According to this theory, the condition of the economic structure of
developing countries which can lead to inflation are:

Acceptance inelasticity Export

Inelasticity offer or Domestic Food Production

2.4. Causes of Inflation

The cause of inflation in general can be divided into two, namely:
1. Demand-pull inflation
Increased demand for goods and services will increase the demand factors of
production. Increased demand for lead production factor price increases. So,
inflation occurs because of the increase in total demand as the economy is
concerned in a situation of full employment. Inflation caused by excessive total
demand resulting in a change in the price level is known as demand pull inflation.
2. Cost-push inflation
Inflation is due to the rising cost of production (input) resulting in the price of
products (output) produced goes up.
The government was so apprehensive that inflation occur. From the description of the
types of inflation can be identified factors that cause inflation as follows:
1. The increase in public demand for goods and services
When the government raised the salaries of civil servants (PNS), usually followed by a rise
in demand for goods and services. Decreasing the number of goods on the market so
quickly that PNS couldn't understand it. When the magnitude of the increase in demand is
not offset by additional volume of goods and services in the market, then this will result in
rising prices of goods and services. The increase in salaries of civil servants is basically
indicates an increase in the money supply. This type of inflation is called demand-pull
inflation.
2. The increase in production costs
At the time the government raised the price of fuel oil (BBM), the price of goods in the
market will also increase. Due to the increase in fuel prices resulted in increased
production costs, as a result the company also raise the price of goods and services. Here
the case of cost-push inflation.
3. The deficit budget (Budget)
Budget deficits are covered by printing new money by Bank Indonesia, will result in an
increase in the money supply, where it will have an impact on prices of goods and services.
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4. The decline in the exchange rate

The decline in the exchange rate against foreign currencies, such as US dollars, yen,
Deutsche Mark

is such a genius that they immediately gave her a position at the

goverment and will have an impact on the more expensive goods imported production.
This results in an increase in production costs.
2.5. Impact of Inflation
Inflation has an impact on the individual and to the widespread economic activity. The
impact can be negative or positive, depending on the severity.
1. Positive Impact of Inflation
The positive influence of inflation occurs when the inflation rate is still at the
percentage rate applicable credits. For example, at the time the loan interest rate is
15% per year and inflation rate of 5%. For developed countries, inflation as this
will stimulate economic activity and development. Why is that? This happens,
because the businessmen / entrepreneurs in developed countries can take advantage
of rising prices to invest, produce and sell goods and services.
If inflation is light, will have a positive effect in the sense can stimulate the
economy better, ie

Increasing national income

Getting people excited to work,

Saving and investment holding.

For people who borrow money from a bank (the debtor), inflation is beneficial,
because at the time of payment of debts to creditors, the value of money is
lower than at the time of borrowing.

For producers, inflation can be beneficial if the income is higher than the
increase in production costs. When this happens, producers will be forced to
double its production (usually occurs on large employers).

2. Negative Impact
As for the impact - the impact in the event of uncontrolled inflation
(hyperinflation), among others:
People are not excited to work, saving, investment holding and production as prices
are rising rapidly. People are reluctant to save because the value of the currency
6

goes down. Although savings earn interest, but if the interest rate above inflation,
the value of money still declining. When people are reluctant to save money,
business and investment will be difficult to develop. Because, for developing the
business in need of funds from the bank obtained from public savings
The recipients of fixed income such as civil servants or private employees and
workers will also be overwhelmed bore and offset the price so that their life is low
and fell from time to time.
Inflation is too high no small impact on the economy, especially the level of
prosperity of society. The impact of inflation, among others:

Impact of Inflation on Equity Income

Inflation Impact on Output (Production)

Encouraging Investment Speculative

Cause the Interest Rate Increases and Will Reduce Investment

Economic situation raises uncertainty in the Future

Raises Issue Balance of Payments2. Negative Impact of Inflation

2.6 How to Overcome Inflation

Here, you will get to know some of the government's policy in controlling inflation. They
are such ambitious a group that prevent inflation.
1. Monetary Policy
According to the classical monetary theory, inflation occurs because of the addition
of the money supply. Thus, theoretically relatively easy to cope with inflation, ie by
controlling the money supply itself. Monetary policy is the action taken by Bank
Indonesia to increase or decrease the money supply. When the money supply too
much so that inflation rose sharply, Bank Indonesia will soon implement monetary
policies to reduce the circulation of money.
These policies include:
Political discount and interest on loans: By reducing the amount of money in
circulation, can be done by raising interest rates, it is expected the demand for
credit will be reduced. Political open market: The central bank sells bonds or
securities to capital markets to absorb money from the public and the central bank
7

sells securities can suppress the development of the money supply so that the
money supply can be reduced and the rate of inflation may be lower. Improved cash
ratio: Raising cash reserves in the bank so that the amount of money banks can lend
to borrowers / society to be reduced. This means it can reduce the amount of money
in circulation. Selective credit, central bank policy to reduce the amount of money
in circulation by means of granting credit. Countermeasures severe inflation (hyper
inflation) reached by way of doing sneering (cutting of the currency). This sneering
been done by the Bank on 13 December 1965 which cut the value of the currency
denomination of Rp. 1000.00 to Rp. 1.00, at the time of inflation reached 650%.
2. Fiscal Policy
How can fiscal policy to control inflation? As you know, fiscal policy is a policy
relating to government revenues and expenditures. Government fiscal policy to
reduce inflation is to reduce government spending, raise tax rates and hold
government loans.
Fiscal policy is a policy that is associated with the government financially. The
shape of this policy include:

Reduction of government spending, so that overall spending in the economy

can be controlled.

Raising taxes, will result in receipt of public money is reduced and this
contributes to the declining purchasing power, and of course, the demand for
goods and services that are consumptive certainly reduced.

Conducting government loans, for example, the government cut public sector
salaries 10% for savings, this happened during the old order.

3. Non-Monetary Policy and Non-Fiscal

In addition to monetary policy and fiscal policy, the government has a policy of
non-monetary / non-fiscal in three ways, namely to raise production, stabilize
wages (salary), and security prices, as well as the distribution of goods.
4. Non-Monetary Policy
Non-Monetary policy can be done by increasing production, wage and price control
policy and the distribution of goods.
Increase production, this method is quite effective given the inflation caused by the
increase in the number of consumer goods is not balanced with the amount of

money in circulation.
Wage policy, an attempt to stabilize the wage / salary, in the sense that wages are
not often increased due to the increase in relative is often done to increase the
purchasing power and in turn will increase the demand for goods as a whole and
will ultimately lead to inflation. Public are such anxiety because inflation they have
not got some money.
Price control and distribution of goods, She always uses such fresh food meant that
the price is not an increase, it is like the government in setting the highest price
(highest retail price / HET). Good price controls will not work without supervision.
Good supervision will usually cause the black market. To avoid the black market,
the distribution of goods must be carried out smoothly. Policies related to the
output. The increase in the number of outputs can be achieved for example by
policy to reduce import duty so that imports are likely to rise. With the increasing
number of goods in the country tends to be lowered harga.Kebijakan pricing and
indexing is done by determining the ceiling price.
5. Real Sector Policy
Government stimulate banks to provide more specific credit to MSMEs (Micro,
Small and Medium Enterprises). For example BRI launched this year as Microyear.
Pressing the flow of goods imported by raising taxes. Stimulate people to use
domestic products

2.7 The Pictrure

Types Of Inflation
1. Inflation Based On severity
Low Inflation

Moderate Inflation

High Inflation

Hyperinflation

10

2. Inflation Based Cause

Demand-pull Inflation

Cosh-push Inflation
11

3. Originally Inflation Based

Inflation due to the budget deficit

12

Imported Inflation

Impact of Inflation
1. Positive Impact of Inflation and Negative Impact

How to Overcome Inflation

1. Monetary Policy

13

2. Fiscal Policy

3. Non Monetary Policy

Benefit Parties:
1. The entrepreneur earns so much money he has lost all sense of what a dollar is
worth who at the time before the onset of inflation, has had a stock / inventory
production of goods ready for sale in bulk.
2. The merchants that with inflation using the occasion plays the price of goods.
Methods used is to raise prices, because they want to make a profit / gain great.
3. The speculators are persons or entities that hold speculation, by hoarding as much
as possible before the onset of inflation and sell it back on when inflation occurs, so
that the price increases greatly benefit them.

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4. The borrower for the loan had been taken before the price of goods rises, so the real
value was higher than after inflation occurs, but the borrower pays back fixed in
accordance with the agreements made prior to inflation.
Parties Disadvantaged:
1. The consumer, because they have to pay more, so that goods obtained less when
compared to the prior occurrence of inflation. They're such nice persons
2. They fixed income, due to the fixed income, rising prices of goods and services,
resulting in the amount of goods and services that can be purchased becomes less,
so that the real income / markedly reduced, whereas the increase in income or
revenue in the event of inflation can hardly be expected. Public has such adaptable
situations in economy indonesian.
3. The contractor or contractors, because they have to expend additional costs in order
to cover expenses due to inflation and result in reduced profits from the project.
4. The lender / creditor, because the real value of the loan has been granted become
smaller as a result of inflation.
Result of Inflation
Inflation has a positive impact and severe negative effects, depending whether or not
inflation. If inflation is lightweight, it has a positive effect in the sense that can stimulate
the economy better, which increases national income and make people eager to work,
saving and investment holding. Conversely, in times of severe inflation, which in the event
of uncontrolled inflation (hyperinflation), the state of the economy into chaos and felt
sluggish economy. People are not excited about working, saving, or hold investments and
production as prices are rising rapidly. The recipients of fixed income such as civil servants
or private employees and workers will also be overwhelmed bore and offset the price so
that their life is low and fell from time to time. Goverment never knew the recipients of
fixed income had so many dollars.
For people who have a fixed income, inflation is very detrimental. For example, a retired
civil servant in 1990. In 1990, his pension money enough to make ends meet, but in 2003
or thirteen years later, the purchasing power of money may be only half.

private

employees has so few incomes! It's really quite sad, This means that retirement money is
no longer sufficient to meet their needs. Conversely, people who rely on income based
15

benefits, such as employers, are not harmed by inflation. So it is with employees who work
in companies with payroll following the inflation rate.
Inflation also causes people reluctant to save because the value of the currency goes down.
Indeed, savings earn interest, but if the interest rate above inflation, the value of money is
still declining. When people are reluctant to save money, business and investment will be
difficult to develop. Because, for developing the business in need of funds from the bank
obtained from public savings.
For people who borrow money from a bank (the debtor), inflation is beneficial, because at
the time of payment of debts to creditors, the value of money is lower than at the time of
borrowing. Instead, the lender or the lender will lose money because the value of refund is
lower than at the time of borrowing.
For producers, inflation can be beneficial if the income is higher than the increase in
production costs. When this happens, producers will be forced to double its production
(usually occurs on large employers). They have so little food, this is result inflation they
are starving to death. However, when inflation led to rising production costs and eventually
harm the manufacturer, the manufacturer is reluctant to continue production.
Manufacturers could stop production for a while. In fact, if not able to keep pace with
inflation, businesses are likely to go bankrupt manufacturer (usually occurs in small
businesses).
In general, inflation can result in reduced investment in a country, pushing up interest rates,
encourage speculative investment, the failure of the implementation of development,
economic instability, balance of payments deficits, and declining living standards and
welfare of the community.

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Chapter III
The Characteristic

Modifiers Cause and Result

1. It Refers to So + Adjective + That
Be related by the article :
Example :

The government was so apprehensive that inflation occur.

2. It Refers to So + Adverb + That

Be related by the article :
Example

Decreasing the number of goods on the market so quickly that PNS couldn't
understand it.

3. It Refers to So + Many/Few + Count Nouns

Be related by the article :
Example

Goverment never knew the recipients of fixed income had so many Dollars.

Private employees has so few incomes! It's really quite sad.

4. It Refers to So + Much/little + Uncount + nouns

Be related by the article :
Example :

Jake earns so much money he has lost all sense of what a dollar is worth.

They have so little food, this is result inflation they are starving to death.

5. It Refers to Such + Adjective + Count nouns (Plural)

Be related by the article :
Example :
17

Tony has such adaptable situations in economy indonesian

They're such nice persons

6. It Refers to Such + Adjective + Uncount nouns

Be related by the article :
Example :

Public are such anxiety because inflation they have not got some money.

She always uses such fresh food.

7. It Refers to Such + Adjective + a + Countable nouns + That

Be related by the article :
Example :

They are such ambitious a group that prevent inflation

8. It Refers to Such + a + Adjective + Count nouns + That

Be related by the article :
Example :

Deutsche Mark is such a genius that they immediately gave her a position at the
goverment.

18

Chapter IV
Closing

4.1 Conclussion
From the analysis and discussion in the previous chapters can be summarized, as follows:
inflation is a process of rising prices in general and continuous (continuous) with regard to
market mechanisms that can be caused by various factors, among others, increased private
consumption, excess liquidity in the market which triggers consumption or even
speculation, to include also due to the presence of disfluencies distribution of goods.
If the price of a good decreases, then the purchasing power of the community and the
public demand for such goods to rise. Conversely, if the price of a good increases, the
purchasing power will decline. As stated in the law of demand. Inversely proportional to
the offer, if the price of an item is on the decline, then the supply of goods will decline as
well, but if the price of these goods are increased, it will offer the goods will also increase.
In accordance with the law of supply. Inflation depends on a number of factors that
influence the rise and fall of the price level, also depends on the demand of the goods.
4.2 Suggestion
The Indonesian government should immediately take an action that is wise, more attention
to the community and to protect the public from inflation. Because inflation can reduce the
purchasing power of the people and also very miserable poor. By continuing welfare of the
people of rising inflation Indonesia was diminished.
But not only the government that seeks to address the problem of inflation but also society
should support the government to participate in the efficient use of fuel by improving
energy efficiency in the transport sector.

19

References

http://www.academia.edu/6852624/MAKALAH_EKONOMI_MAKRO_INFLASI
_DAN_PENGANGGURAN_Disusun_Untuk_Memenuhi_Tugas_Mata_Kuliah_Ek
onomi_Makro
https://dianitashakura.wordpress.com/2014/04/01/makalah-pengantar-ekonomiinflasi/
http://www.roanestate.edu/owl/cause.html
http://www.englishpage.com/minitutorials/sosuch.html

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