discuss the structure theory of inflation
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Explanation:
There is another important theory of inflation known as structural inflation which explains inflation in the developing-countries in a slightly different way. The structuralists argue that increase in investment expenditure and the expansion of money supply to finance it are the only proximate and not the ultimate factors responsible for inflation in the developing countries.
According to them, one should go deeper into the question as to why aggregate output, especially of food-grains, has not been increasing sufficiently in the developing countries to match the increase in demand brought about by the increase in investment expenditure, and money supply. Further, they argue why investment expenditure has not been fully financed by voluntary savings and as a result excessive deficit financing has been done.
Structural theory of inflation has been put forward as an explanation of inflation in the developing countries especially of Latin America. The well-known economists, Myrdal and Straiten who have proposed this theory have analysed inflation in these developing countries in terms of structural features of their economies. Recently Kirkpatrick and Nixon have generalised this structural theory of inflation as an explanation of inflation prevailing in all developing countrie
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