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Essay / Volatile Foods Essay - 535
According to the article, the inflation rate of volatile foods is actually high at 15.1% in Indonesia. The causes of this high inflation rate have led to supply problems; The Consumer Price Index (CPI) is strongly influenced by fluctuating prices of volatile raw materials, which are affected by two aspects: weather and food supply. As a result, they will not be able to produce the product productively. In addition, high inflation will threaten citizens' purchasing power and affect domestic consumption. Diagram 1 shows how the price level increases by 15.1% (PL to PL1) and how this problem increases unemployment and inflation. However, this will cause national production to shift to the left, which is an unlikely situation in the long term, but for this volatile food inflation in Indonesia, the Y is moving to the left towards Y1. In the article it also mentions the solution that they can come up with two different types of supply side policies. One is the increase in long-term GDP and the decrease in SR inflation. In the two diagrams below it shows the solution....