Macroeconomics_Unit4_IP - Colombia, Unemployment and...

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Colombia, Unemployment and Inflation Kregg M. Soltow Macroeconomics Unit 4 Individual Project August 9, 2010 American Intercontinental University Colombia, Unemployment and Inflation Higher coffee revenues in the 70s caused a quick increase in costs and demand, which then in turn furthered inflation. This took place at a time when Colombia was also experiencing rising oil prices. As its economy entered the recession, accelerated discrepancy spending by the government continued to stimulate price increases. By the early 80s, Colombia had entered an era of rising prices combined with economic stagnation. The rapid expansion of the money supply and frequent devaluations of the peso also fed inflation in that time. Although Colombia was able to avoid the hyperinflation characteristic of Argentina and Brazil in the 80s, unrelenting yearly increases in the consumer price index of 20-25% had been evident since the mid 70s. The annual inflation rate dipped below 20% in 1983 for the first time in more than a decade, only to jump again in 1985. In 86 government efforts to organize public debt and channel premium proceeds from that year's coffee explosion into the public division may have eased inflationary pressures, but the consumer price index still continued to rise by 21 %. (Plan Colombia) Fueled by cost increases in domestically produced items, including accommodation, food, and clothing, inflation climbed to 25% in 87. In the case of food prices, shortfalls in domestic production spiked those prices upward increasing reliance on more expensive foreign edibles. A price indexed minimum wage and market adjustments throughout the wage structure also took its toll on inflation. In 87 the minimum wage rose by 24%, almost equaling the price increases for that year. Now, along with those increases, the large number of U.S dollars that entered
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This note was uploaded on 02/17/2012 for the course ITCO 101 taught by Professor Gugenhiem during the Spring '12 term at AIU Online.

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Macroeconomics_Unit4_IP - Colombia, Unemployment and...

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