Inflation

1 January 2017

Unemployment rate – is the percentage of the total workforce that is unemployed but that are willing to work and that actively looking to seek employment. Inflation rate – is the increase in the levels of price for goods and services. Inflation is measured by annual percentage increase and as inflation raises the dollars that you own but a smaller percentage of a good or service. Interest rates – interest rates is the amount charged that expressed in a percentage by a lender to borrower for the use of an asset such as a house or a car for example.

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Part 2 Purchasing of groceries an example of economic activities The purchasing of groceries effect the economy more so than most people think. During or nations recession the vast majority of household cut back of there grocery purchasing some families even started growing a garden and canning there own vegetables either because of the reduction of family income or for fear of what may happen with our economy. Not only did families cut back of there groceries purchases but families also cut back on eating out at restaurants.

This in turn played a part in effecting our countries GDP. The gross domestic product (GDP) is a way to gauge the market value of all recognized final goods and services produced with in a country for a given time period. The ripple effect of this was unemployment rates. Once the food (vegetables, meats, grain etc) or harvested from farms the food is shipped to companies for packaging, distribution center, grocery stores etc.

Whenever the demand of food slows down and people cut back of there purchasing of food the companies that package the food or hold the food for an example the grocery stores distribution warehouses will cut back on there employees either by layoffs or downsizing departments and letting employees go. One of the bigger layoffs that has happened recently has been maple leaf foods who in October of last year cut 1,550 jobs and closed plants in four different provinces.

Even though maple leaf foods is a Canadian based is still effects our countries GDP and unemployment rate because the organization has operations in the United States as well as operations in the United Kingdom, Asia and Mexico. Surprisingly with our nations increased food inflation people cutting back on the grocery purchases and unemployment does not play a part in the inflation. The inflation of food costs are due to bio fuels and transportation costs (fuel). There are 4 more main components that cause the increase: 1.

First is the United States government subsidizing corn production for the use of bio-fuels. This in turn takes corn out of the food supply in return raises food prices. 2. The Second reason is the World Trade Organization (WTO) limits the amount of corn and wheat that the U. S. and European Union (EU) can subsidize and store in stockpiles. This reduces the cushion available to add to the food supply when there are shortages, thus adding to food price volatility (Amadeo 2012). 3. Third, is due to more and more people around the world consuming meats.

Grains are used to feed the animals that provide meat, further reducing the supply and increasing price volatility. 4. Fourth, higher oil and fuel prices lead to higher food prices. Food is transported great distances, especially if imported. Higher oil and gas prices increase shipping costs, which translates into higher food prices (Amadeo 2012). In conclusion although something as simple as buying groceries can effect our economy and our countries unemployment rate the impact of food inflation is brought on more so by the cost of oil, fuel and the pursuit of alterative fuel.

References Diane Troops. (2010). Grocery buying in the Current Economy.

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