Inflation in Vietnam Essay

2584 WordsDec 29, 201211 Pages
Inflation is one of the significant elements of each country. Typically, the small inflation rate is very useful to stimulate the GDP growth of a country. However, sometimes the inflation rate is a danger that destroys a country’s economy. It is one of big causes, which make economy of a country get out of control. The value of money of that country will decrease, so it will seriously affect life of residents, especially poor people. In these days, there are a number of articles about inflation of many countries all over the world. As the inflation rate is two digits, it put Vietnam’s economy on the alert. In the present, the economy of Vietnam is in dangerous area. According to the statistic of Vietnam government, on 24 December 2010, Vietnam’s inflation rate was 11.75%, and it kept increasing to 12.17% in January 2011. Price of oil increasing is a cause that has pushed price of all goods and services higher. Thus, residents, especially poor people, must suffer directly effects of inflation storm. Besides, the increase in raw material and interest rate of commercial banks make local companies face with more difficulties to compete with foreign companies about price and quality. Moreover, the increase in taxes of government, the global food crisis and the value change of dollar make more pressure for Vietnam dong and inflation of this country. To help deeply understand the situation of Vietnam’s economy, there are some concepts and models about inflation. Firstly, inflation is a situation of continuously rising average price level. The weighted average of all prices must be rising, not just one product. It implies a decrease or depreciation in the value of money. Consumer Price Index (CPI) reflects Inflation. As a result, inflation brings some negative impacts of inflation. Firstly, it is effects on aggregate output. People reduce their savings, which will reduce

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