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Would this be a good topic for my Macroeconomics Econ IA

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So I need to do a macroeconomics IA.

I found this article on inflation.. I could definitely have a diagram about SRAS shifting to the left leading to inflation. A diagram of an inflationary spiral. And a diagram of the government's solution which is banning onion exports.

My only issue is if this is considered more microeconomics than macroeconomics? They do say the supply shortages leads to 'inflation' and they're not just talking about onions, but the article transitions to talking about onions and high onion prices which is just one good. Mind you, the inflation is still regarding overall increase in prices of foods due to monsoon, but it does look into onions and i'm not sure if that's allowed. MOREOVER, the government solution is to ban onion exports. Now this is to decrease aggregate demand, but now I am thinking this is too microeconomics of an idea instead and thus i cant choose the article.

 

What do you guys think? is it okay to use this article?

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Yes I think you could use this article .

The article mentions "retail inflation " , which likely indicates PPI (The producer price index to measure inflation). So you could likely have a paragraph about this.

You could talk about interest rate cuts boosting inflation towards the RBI'S targets.

These are just  a few ideas, but confirm with your teacher if you could use this.

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4 hours ago, Vighnesh said:

Yes I think you could use this article .

The article mentions "retail inflation " , which likely indicates PPI (The producer price index to measure inflation). So you could likely have a paragraph about this.

You could talk about interest rate cuts boosting inflation towards the RBI'S targets.

These are just  a few ideas, but confirm with your teacher if you could use this.

 

Could i still do a paragraph of the government banning onion experts and thus AD decreasing (to decrease inflation)? or is this not a mactoeconomics thing

Edited by Freyan

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On 10/12/2019 at 7:48 PM, Freyan said:

Could i still do a paragraph of the government banning onion experts and thus AD decreasing (to decrease inflation)? or is this not a mactoeconomics thing

No, it doesn't make any sense for the banning of the exports of just one good to affect AD as a whole.

Maybe you could generalize this to the food basket an average Indian consumes??

Again, don't take my word for it. Ask your teacher

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1 hour ago, Vighnesh said:

No, it doesn't make any sense for the banning of the exports of just one good to affect AD as a whole.

Maybe you could generalize this to the food basket an average Indian consumes??

Again, don't take my word for it. Ask your teacher

 

 

@Vighnesh

My teacher said that its possible indian onions are so important to the indian economy that they affect AD. Does that sound, right? They never said they banned other vegetables so i guess i cant speculate right?

Also, if you read the article its weird they get cost push inflation, then ban exports of onions (decrease AD to stop inflation?), and then they decrease interest rate which prompts AD to increase so they cause inflation once again.. don't you think that's kind of weird that they get inflation, decrease inflation, and then increase inflation again (because the indian gov doesn't mind if the inflation is a certain amount...)

The only reason for this might be that with cost inflation and decreasing AD with a ban of onion exports the real output has decreased a lot so the government realizes that they need to increase real output by promoting spending with a low interest rate and because they realize its okay to have a certain amount of inflation?

Edited by Freyan

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You can speculate to an extent.

I think that the govt is trying to reduce cost - push inflation and rather promote demand- pull inflation.

Cost push inflation has more serious consequences for an economy (leads to recession, unemployment), whereas demand pull inflation expands total output.

Also the article says that onion exports were banned "to keep the price surge (of onions) from spiraling out of control". So the main aim behind banning onion exports was to keep the price of onions from rising too high. Of course, you could still investigate the effect of this ban on AD.

And yes , the RBI is trying to promote expenditure in the Indian economy by cutting interest rates.

Think about the potential impacts this could have on the agricultural sector in India (accounts for the greatest percentage of India's GDP)

 

 

 

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