Ministry of education tashkent financial institute

REPUBLIC OF UZBEKISTAN HIGHER AND SECONDARY SPECIAL

MINISTRY OF EDUCATION

TASHKENT FINANCIAL INSTITUTE

'' ECONOMY '' DEPARTMENT

On the subject of "MICROECONOMICS. MACROECONOMICS"

COURSE WORK
Theme: Inflation and anti-inflation policy.
Done: “Banking faculty”, BI-51(i) group student, Begmatov Axror
Checked: Omonov Nurbek

The date on which the course work is submitted for review«____» _______2021 y.		The date on which the course work was reviewed«____» _______2021 y.
The date on which the course work is defended«____» _______2021 y. Mark «_____» _________	___________ (signature) ___________ (signature) ___________ (signature)	Commission members: __________________ __________________ __________________

TASHKENT – 2021

Plan

Introduction……………………………………………………………………3

Main part:

1. 
   Theoretical background of inflation…………………………………...6
   
2. 
   Causes of inflation and its impact on Economic growth……………..13
   
3. 
   Analyses of Philip’s curve……………………………………………...19
   
4. 
   Inflation and defilation in current pandemic situation………………24
   

Conclusion……………………………………………………………………...27

List of used literature………………………………………………………….29

Introduction

Inflation is a quantitative measure of how quickly the price of goods in an economy is increasing. Inflation is caused when goods and services are in high demand, thus creating a drop in availability. Supplies can decrease for many reasons; a natural disaster can wipe out a food crop, a housing boom can exhaust building supplies, etc. Whatever the reason, consumers are willing to pay more for the items they want, causing manufacturers and service providers to charge more.

The most common measure of inflation is the consumer price index (CPI). The CPI is a theoretical basket of goods, including consumer goods and services, medical care and transportation costs. The government tracks the price of the goods and services in the basket to get an understanding of the purchasing power of the U.S. dollar.

Inflation is often seen as a big threat, mostly by people who came of age during the late 1970s, when inflation ran wild. So-called hyperinflations occur when the increase in monthly prices exceeds 50% over some period of time. These periods of rapid price increases are often accompanied by a breakdown in the underlying real economy and may also see a sudden increase in the money supply.

While hyperinflations can be scary, they are historically rare. In reality, inflation can be either good or bad, depending on the reasons and level of inflation. In fact, a complete lack of inflation can be quite bad for the economy, as we will see below with deflation. A modest amount of inflation can actually encourage spending and investing, as inflation can slowly erode the buying power of cash—so it is relatively less expensive to buy that $1,000 appliance today than the same $1,000 in a year.

Deflation occurs when too many goods are available or when there is not enough money circulating to purchase those goods. As a result, the price of goods and services drops. For instance, if a particular type of car becomes highly popular, other manufacturers start to make a similar vehicle to compete. Soon, car companies have more of that vehicle style than they can sell, so they must drop the price to sell the cars. Companies that find themselves stuck with too much inventory must cut costs, which often leads to layoffs. Unemployed individuals do not have enough money available to purchase items; to coax them into buying, prices get lowered, which continues the trend. (Note that deflation is not the same as disinflation, which is a decline in the positive rate of inflation from period to period).

In Uzbekistan.

Annual inflation rate in November of this year continued to slow down and reached 11.3%. At the same time, since the end of September there has been a certain acceleration in the growth of prices after their decline in the summer months.

The upward pressure on inflation was mainly exerted by seasonal fluctuations and the current dynamics of food prices. The rise in prices for food products in November amounted to 16.3% in annual terms. In particular, prices for meat products increased by 17.7%, fruits and vegetables - by 18.5%, bakery products - by 16.0% versus November 2019¹.

The growth rates of prices for non-food goods and services for 11 months of 2020 were significantly lower than the general inflation rate and amounted to 8.3% and 6.5%, respectively.

As a result, the annual core inflation rate continued its downward trend and fell to 11.5%.

Inflationary expectations of the population in November this year slightly decreased, while the expectations of business entities, on the contrary, increased. In a number of areas of entrepreneurial activity, the growth of inflationary expectations is associated with the need to implement additional costs due to the transition to alternative types of energy resources, or with the likelihood of a reduction in production volumes due to unstable access to traditional types of energy (natural gas, electricity) in winter.

Deflation can lead to an economic recession or depression, and the central banks usually work to stop deflation as soon as it starts.

When credit providers detect a decrease in prices, they often reduce the amount of credit they offer. This creates a credit crunch where consumers cannot access loans to purchase big-ticket items, leaving companies with overstocked inventory and causing further deflation.

Deflation is worse because interest rates can only be lowered to zero. As businesses and people feel less wealthy, they spend less, reducing demand further. Prices drop in response, giving companies less profit. Once people expect price declines, they delay purchases as long as possible. They know the longer they wait, the lower the price will be. This further decreases demand, causing businesses to slash prices even more. It is a vicious and downward spiral.

Inflation lowers your standard of living if your income doesn't keep pace with rising prices. Most of the time, it rarely does. But if inflation is around 2%, then people buy things now before prices go up in the future. That can spur economic growth. Even when it's mild, inflation always impacts our life.

1.Theoretical background of inflation

Different economists have presented different theories on inflation. The economists who have provided the theories of inflation are broadly categorized into two labels, namely, monetarists and structuralizes. Monetarists associated inflation to the monetary causes and suggested monetary measures to control it.

On the other hand, structuralizes believed that the inflation occurs because of the unbalanced economic system and they used both monetary and fiscal measures together for sorting out economic problems.

There are three main theories of inflation, which are shown in Figure²:

Let us learn about the different theories of inflation (as shown in figure) in detail.