Department Of Economics
East West University Submitted by:
Afia Ibnat Sajoti : 2012-2-31-118
Nusrat Jahan : 2012-3-30- fzuuiuhio Date of submission:
Table of contents:
1.Abstract………………………………………………………………………………………………………………1
2.
Abstract:
Increases in price level are also referred to as inflation. Such price increases in an economy are usually due to the effect of macroeconomic factors like demand, supply and consumption. All other macroeconomic factors that affect increases in price level are somehow related to these three factors. Those other areas include interest rate, monetary policies and Gross Domestic Product (GDP).
Since mid-2007 basic food prices have rocketed with disastrous consequences for poor consumers. The spike in international market prices through the first half of 2008 has now subsided. Still prices of rice, wheat, corn (maize), and edible oils remain well above the levels of just a year ago and are likely to remain elevated and volatile for years to come. Two separate dynamics need to be understood in order for countries to make necessary adjustments. A gradual rise in food prices has been under way since at least 2004 with three general and fundamental factors at work: rapid economic growth in the People’s Republic of China and India especially put upward pressure on prices as demand simply outpaced supply; a sustained decline in the United States dollar since mid-decade added to the pressures on dollar-denominated international market prices; and a combination of high and rising fuel prices coupled with legislative mandates to increase production of biofuels has established a firm link between petroleum prices and food prices. The causes of price spikes are crop-specific. Drought and disease in 2007 caused wheat prices to jump, and supplies of edible oil were reduced as farmers in the