梁瑞硕

1. Brief Introduction

In economics， inflation is a significant and visual concept. It is a sustained increase in the general price level of goods and services in an economy over a period of time. Inflation reflects a reduction in the purchasing power per unit of money； it means money will lose its real value when it is as medium during exchanging. Inflation rate is a major factor to measure inflation. Based on diverse economy development level， each country has its own trend and solutions for inflation. In British， government controls inflation via sustainable monetary policies. At first， Britain government endures depressed output and high unemployment to reduce inflation rate. For a little while， policymakers find they are failed. In order to achieve valid resolution， the Prime Minister recognizes and analyzes the reasons for failure， then redesigns and determines policies within various techniques to control inflation. In this paper， I will mainly portrait effective factors about inflation in British， the inflation influence in British and remedial actions for Britain inflation within different time periods.

2.Effective Factors

Generally， effective factors for inflation are concerned firstly during analyzing the inflation in specific area since different types of inflation have different and individual features. In British， currently one main basic theory can influence the inflation. It is the quantity theory of money， during the huge and long term of inflation； it is widely accepted as the main reason for inflation. It means that the growth rate of money supply and the growth rate of economy which could combine with each other to reflect the inflation rate. However， during the small and medium term of inflation， elasticity of wages， prices and interest rate could be the main factor to influence the inflation.

Based on this theory， the debate of whether the short-term influence contains long enough to be stable and efficient become hot and popular between the monetarism and Keynesian. The perspectives for monetarism are wages and prices could adjust quickly and enough to keep other factor into minimum. In views of Keynesian， prices and interest should adjust at other factors， then all these differences would cause inflation within long-term as real output for inflation theory.

Given the reality of British economy， the quality theory of inflation is paid very little attention by the policymakers when they analyze and discuss the effective factors of Britain inflation， and it is just recorded as a historical factor. This theory only focuses on expectation of seller and desires of buyer. It is a relatively narrow concept. It means seller can accept the goods currency which is suit for desire for buyer during exchanging.

3.The Influence of Inflation in British

Generally， the influence of inflation not only reflects on the Britain economy but also on the purchasing power of money. It has advantages and disadvantages for British economy and society. Their fixable abilities depend on the degree of their income. The nature of money will be highlighted， such as price level or functional currency. The inflation rate also would influence the real interest on loan the increasing of inflation rate will decrease the interest rate.

Meanwhile， the inflation brings the positive influence to the Britain society. First， the inflation is benefit for high unemployment in the labor market. The inflation also creates more huge room for design the money supply policies in order to balance and control among discount rate， nominal interest rate and inflation rate. The inflation would assist the investment to earn more interest. Government can utilized better the Mundell–Tobin effect on the investment policy. In addition， stable inflation would basically avoid the unstable deflation. Finally， Moderate inflation could bring the interest rate to catch more investment opportunities which could stimulate the development of financial markets.

However， it is also harmful for Britain society and economy when the inflation rate is higher or unpredictable. As we all know， higher inflation rate will affect the market or companies design the long-term financial plan and budget. It could expand hidden tax for customers. Higher inflation will cause more expensive exports prince and affect the balance of import and export trade. The situation about employees would ask more higher salary because of higher inflation rate could increase the further inflation rate. Furthermore， higher inflation rate would prejudice the hoarded goods for customers. Moreover， higher inflation rate would influence the progress of whole Britain business cycles.

4.Further perspectives for Britain inflation

Although the unemployment rate in UK keeping improving now， it does not mean to relax. The other three factors should be considered in further design process. First， CPI and RPI would rise at any time； the core trend for inflation rate could be a matter for designing the economic policies for Britain. Secondly， inflationary surges in money supply could make more mistakes before it is applied in shifting of financial markets. Finally， the psychological character of policymakers is also an effective factor.

5.Conclusion

Economic world is changing all the time. Inflation is one of the most common phenomenons in a country. British economy went through thrive， decline and recovery in the past years which offer other countries economic implications as to how to deal with inflation， maintain development and survive in economy crisis. This paper explores effective factors about inflation in British， the influence of inflation in British and remedial actions for Britain inflation within different time periods. Lastly， this paper points out further perspectives for British inflation.

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