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EFFECTS OF INFLATION ON IMPORTS AND EXPOPRTS

EXPLAIN THE EFFECTS OF INFLATION
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sil331
Well, by inflation its easy to understand that the prices of products and services is going to flare up. As prices of the products and services increases, money loses power(meaning it can not purchase as much as it did before). Now for the ''given Country'' going through inflation:
  • For exports this means that the product going outside the country will go with a higher market price, resulting in fewer purchases of its stocks. Do its high price it will not be able to compete in the international market and many investitors, companies etc will be more inclined to buy a more affortable product than the one that is pricy. A product going through inflation has unstable price making it so not very desirable.
  • For imports now its a little tricky. Import are the products and services that the country takes from others. If the other country is not going through an inflation the product and services that are going to enter to our ''Given Country'' will have a stable market price. In other words it will be cheaper than the local product and so it will be purchased more, unless the price increases do to the border tariffs.
  • Depending on this, do to inflation you may have a dicrease in exports and an increase in imports, unless the border tariffs make even the imported product thinking twice if they should increase the price and resulting in a decrease in both imports and exports.(because of the high price the imports might not compete with the local product)
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munwar
•Investment and Production •Economic Growth •Living Standard •Discouragement of Savings •Reduction of Exports •Increase in Cost of Govt. Projects •Inequality in Distribution of Income •
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