Ziang, Jacob,Kelly,Peter
WHAT IS PRICE STABILITY?
Benefits
•
Improving the transparency of the price mechanism
•
Reducing distortions of inflation or deflation, which can
exacerbate the distortionary impact on the economic
behaviour of tax and social security systems
•
Preventing an arbitrary redistribution of wealth and
income as a result of unexpected inflation or deflation
Benefits
•
Preserves the integrity and purchasing
power of the nation's money
•
Avoiding unproductive activities to
hedge against the negative impact of
inflation or deflation
Complementary Goals
•
Economic Growth:
achieving price stability
gives certainty and
confidence to households
and investors, increasing
private spending and
hence, economic growth.
Conflicting Goals
•
Full employment - typically, during periods of full employment inflation
is generally high. inflammatory policies are often used during periods
of full employment and counteract demand-pull inflation with higher
cash rates or lower fiscal spending. As a result of lower aggregate
demand, higher unemployment can be expected.
•
Economic Growth:
•
First, supply and demand increases the cost of goods. In a fastgrowing economy, demand is higher than supply. This means that
the cost of good will naturally increase. The result is that the same
goods cost more over time. In other words, inflation occurs.
•
Second, higher wages. Unemployment drops as more people find
work in a high-growth economy. Across-the-board increase in
wages generally results in higher inflation.
Measurement
•
CPI (Consumer price index), which measures
the change of price level of goods and services
from a year to the next.
•
Bank of Canada tries to keep the core rate of
inflation between 1-3％ per year.(Ideally 2％）
Current Figures
Therefore，It is clear that the goal of Price
Stability confers more benefits on Canada
than any of the others and therefore
should be pursed with utmost
determinaion by our federal and provincial
government.
Let's review some key benefits
•
Improving the transparency of the price mechanism.
•
Avoiding unproductive activities to hedge against the
negative impact of inflation or deflation
•
Preventing an arbitrary redistribution of wealth and
income as a result of unexpected inflation or deflation
DEBATE TIME!
THANKS!