The paper "The Impact of Japanese Fiscal Policy on Japan’ s Government Debt" is a great example of a report on macro and microeconomics. The government of Japan through the bank of Japan has adopted different measures to curb the deflation that is facing it. They have fiscal and monetary which have proved not much effective and need to be re-evaluated. This report focuses on the economic problems and policies in Japan as well as the various ways of dealing deflation. It provides an analysis of the difference between the conventional monetary policy and quantitative easing. The difference between inflation and deflation The term Inflation is defined as the occurrence, whereby the price of commodities is high while else the value of money is deteriorated over a length of time.
Inflation is also defined as a substantial increase in price. A number of economists have defined it as a situation where the value of commodities rises more than the value of money over a specific period of time (Svensson 2002). On the other hand, deflation can be defined as the occurrence of disequilibrium which is a result of contraction of purchasing power, hence declining the price intensity.
Similarly, deflation can be defined as the fall of commodity price as a result of an increase of commodity production in the market thus, increasing monetary income (Buiter 2003). The difference between inflation and deflation is that inflation is a phenomenon where the common price level has an optimism growth rate while else deflation is an occurrence where the index of consumer’ s money has a declining rate of growth. In summary, inflation is the increase in money value while deflation is a decrease in commodity prices (Buiter 2003). Preference of moderate inflation to deflation First, with the use of the inflation concept, the Japanese Authority is able to pay-off the government's debts appropriately.
This occurs when the rate of inflation increases enabling the GDP to grow at a higher rate than the deficit rate, hence reducing the debt ratio. The inflation concept in this occurrence increases the rates of bondholders who are paid- off with the inflated currency, thereby relieving the Japanese taxpayers from paying huge amounts of money (Svensson 2002).
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