Economics article commentary: June Harvest to Reduce inflation Essay

Inflation refers to a persistent rise in the general price level in a given breaker point of time usually one year. There are two briny types of pretension namely, demand lick inflation and cost push. Demand pull inflation is hunting expeditiond by raising accumulate demand that pulls up prices in the economy. There are several factors that cause this type of inflation, for example, when judicature trim backs income evaluate leaving consumers with more disposable incomes to spend. However, as far as this condition is concerned it is basically cost push inflation that is of major concern. embody push inflation is caused by rising costs of product that forces producers to step-up prices of the final products.High food prices have been the main driver of inflation payable to the drought that hit the country early last year. kitchen-gardening depends on natural factors beyond human control such(prenominal) as weather. A drought volition cause shortages that entrust result in escalating prices as shown in the diagram below. determine 1DD and S1S1 are the lord demand and tote up curve respectively. A drought will cause a shortage that will make the supply curve to dismission to the left, that is, to S2S2 and price to rise from P1 to P2 as quantity decrrestraints from Q1 to Q2.When the drought affects most part of the country then aggregate supply of food will fall. This of necessity makes food prices to rise. Furthermore, the article says that the rise in inflation has also been due to maturation in international crude oil prices that have resulted into increases in the pump prices of fuel. Fuel is a major component in the production process and so any increase in its price will increase production costs. Consequently, there would be a fall in short-run aggregate supply as shown in the diagram below.Figure 2AD and SRAS1 are the aggregate demand and short-run aggregate supply curves respectively. A rise in cost of production gap the SRAS curve t o the left that is, to SRAS2 average price increases from P1 to P2.Although inflation benefits sellers in call of increased revenue, on the whole, it has several adverse effects. Some of these include minify the living standard of especially fixed income earners, such as pensioners and stipendiary workers. This is especially since the article mentions that the cost of living has been on an upward centralise following increases in inflation that reached to 14.1%. So anything that can help to reduce inflation is a welcome move. The title of this article June Harvest to reduce inflation shows that relief is on the way. Reducing Inflation means that prices will fall making essential commodities affordable by the vast absolute majority of the consumers. However, before the harvest brings the relief the government has a number of policies at its disposal that it may use to combat inflation.Government could use fiscal and fiscal policies. For instance in the case of fiscal policies the government could increase income tax to reduce disposable income of consumers. This helps to reduce aggregate demand and so stabilizes prices. The problem with this policy is that it makes the government unpopular among the voters electorate. Furthermore, it may serve to wane the unemployment problem and might also through down the economic fruit in the long run. Government could also use the supply font policies. These are policies that are used by government to increase the supply potential of the economy. For example, the government could abolish minimum wage laws. This would make it brazen to employ workers but would also reduce total cost of production. Its damage is that workers are bound to be exploited by their employers.In conclusion, government of Uganda should put in place a mechanism to prevent emerging shortage of food by operating buffer stock schemes. And although such schemes have problem, such as cost of shortage, but their existence helps to ease shortages of foodstuffs caused by unpredictable climate changes. After all, prevention is better than bring back. This is important also because the government of Uganda has no control over the international crude oil prices.