Inflation Problem

Inflation is a symptom of general price increases and ongoing. new price increase if inflation is said to occur in general and persistent. Rising rice prices will not trigger inflation if prices of other commodities not komditas-up, and or if the rice price increase does not occur continuously. In terms of economic theory, inflation shows signs of excess demand at the macro. In a sense, from the symptoms of inflation can be concluded that the entire industry in the economy is experiencing excess demand.

Short Term Uncertainty

Uncertainty within a grace period of about one to five years. This uncertainty is usually caused by things that are technical, such as crop failure due to drought came too fast and too long. This failure can disrupt the level of production in one growing season period. This uncertainty causes price movements in the short term. For example, the failure of the rice harvest in Indonesia in 1972 has resulted in inflation of about 40%. on the contrary, the abundant harvest of rice has led to falling prices of dry grain. This uncertainty may affect the expectations of farmers, causing them to become lazy production. If the lazy farmer to produce, then the level of productivity as one of the benchmarks of good economic system is not fulfilled.
Therefore, the economic system must be strengthened ability to deal with this uncertainty. For example, to cope with rising prices come down because of the uncertainty of production, the economic system can be equipped with stabilizing institution price. At the time of abundant harvest of this institution to buy buy a lot to prevent the drop in prices., Harvests are purchased are stored, to be sold on a bad season. Thus, prices do not rise too sharply too that will that will burden the people.