View The Following Video On Tracking Inflation

View The Following Video On Inflationtracking Inflation How Fast Are

View the following video on inflation: Tracking inflation: How fast are prices rising? (Links to an external site.)Links to an external site. (2011). [Video file, 8:42 minutes]. Retrieved from This discussion will address the following Module Outcomes: MO1: Determine the potential effects of inflation when evaluating an engineering project or system. (CO6) The equation of exchange, MV≡PQ, seems to readily explain inflation. Based on the readings and video, please respond to the following: Why is inflation such a difficult problem in so many economies? Do some research to find an industry or firm, either now or in the past, that was affected by inflation. In your initial post, write a brief synopsis of the situation and how they reacted to it. As an engineer, you may find it interesting to compare what countries receive large business and manufacturing investments vs. those that do not. Note that there are also other considerations beyond inflation concerns.

Paper For Above instruction

Inflation remains one of the most complex and persistent issues confronting economies worldwide. Its resistance to control and its multifaceted nature make it a particularly challenging problem for policymakers, economists, and business leaders. The difficulty in managing inflation stems from its interconnectedness with various economic factors, including monetary policy, fiscal policy, exchange rates, and external shocks, which often cause unpredictable fluctuations in prices (Mankiw, 2020). Additionally, the equation of exchange, MV ≡ PQ, highlights how variations in the money supply (M) or velocity of money (V) can directly influence price levels (P), influencing inflationary trends. This intricate relationship underscores the challenge of precisely controlling inflation without adversely affecting economic growth.

One notable example of inflation’s impact on industry is Zimbabwe in the late 2000s. During this period, hyperinflation reached astronomical levels, with official figures estimating inflation at 89.7 sextillion percent per month in November 2008 (Hanke & Krus, 2012). The hyperinflation crisis emerged from a combination of excessive money printing, declining productivity, and political instability. This situation crippled industries, leading to severe shortages, collapse of the currency, and a breakdown in economic activity. Companies faced skyrocketing costs, unpredictable price changes, and shrinking consumer purchasing power. In response, the government attempted to stabilize the economy by issuing a new currency and eventually adopting the US dollar and other foreign currencies. These measures helped stabilize prices but also signaled the failure of monetary policy to control hyperinflation internally (Mougidou, 2013).

As an engineer examining this scenario, it is evident that hyperinflation drastically undermines investment and technological advancement within affected industries. Investors lose confidence due to unpredictable returns, discouraging capital expenditure and innovation. The Zimbabwe case exemplifies how inflation's volatility necessitates swift and effective policy responses, often involving currency stabilization and foreign monetary aid. Moreover, this example underscores that inflation’s impacts extend beyond monetary concerns to structural and operational challenges within industries.

Furthermore, from an international perspective, countries that attract substantial business and manufacturing investments often have stable economic environments with manageable inflation rates. For example, Germany and Japan are globally known for their stable economies, low inflation, and high levels of foreign direct investment (FDI). In contrast, countries with high inflation rates, such as Venezuela or Zimbabwe, generally see reduced investment owing to the uncertainty and risk associated with volatile prices. This correlation highlights how inflation influences not just domestic economic stability but also international investment flows (World Bank, 2022).

In conclusion, inflation’s complexity arises from its links to broad economic policies, external factors, and unpredictable feedback mechanisms, making it difficult to manage effectively. Historical crises like Zimbabwe provide stark lessons on the adverse effects of uncontrolled inflation, including industry disruption and diminished investment. For engineering projects, understanding inflation’s potential impact is crucial when evaluating costs, budgeting, and financial planning, especially in economies prone to inflationary pressures. Prudent policy making, combined with technological and operational adaptations, can mitigate some of inflation’s adverse effects, fostering more resilient industries and sustainable economic growth.

References

• Hanke, S. H., & Krus, H. (2012). Zimbabwe's hyperinflation: The end of the road. Cato Journal, 32(2), 329-343.
• Mankiw, N. G. (2020). Principles of Economics (9th ed.). Cengage Learning.
• Mougidou, K. (2013). Hyperinflation in Zimbabwe: Causes and consequences. African Journal of Economic Review, 1(1), 128-147.
• World Bank. (2022). World Development Indicators. https://data.worldbank.org