17 groups who want a bigger share of that could be provided by the
community. Boediono, 1985:172 c. Theory Structuralisms
This theory gives great attention to the structure of the economy in developing countries. Inflation in developing countries is mainly caused
by factors of economic structure. According to this theory, the conditions of the economic structure of developing countries which can lead to
inflation are: 1 Acceptance inelasticity Exports
2 Inelasticity offer or Domestic Food Production
4. Inflation Causes
According to Prathama, 2008:365 the cause of inflation in general can be divided into two, namely:
a. Demand-pull inflation Increasing the demand for goods and services lead to increased demand
for production factors. The increasing demand for production factors of production causes the price to rise. Thus, inflation occurs due to the
increase in total demand as the economy is concerned in a situation of full employment. Inflation caused by excessive total demand resulting in a
change in the price level is known as demand pull inflation. b. Cost-push inflation
This inflation is due to rising costs of production input resulting in the price of products output generated go up.
18
5. Impact of Inflation
Inflation has an impact on individuals as well as for economic activity broadly. The impact can be negative or positive, depending on the severity.
Sukirno, 2000:309 a. Positive Impact
The positive influence of inflation occurs when the rate of inflation remained at a percentage rate of credit interest applicable. For example, at
the time the credit interest rate is 15 per year and inflation rate of 5. For developed countries, inflation as this would encourage economic
activity and development. Why is that? This happens, because the businessmen entrepreneurs in developed countries can take advantage of
the price increase to invest, produce, and sell goods and services. b. Negative Impact
Inflation is too high no small impact on the economy, particularly the level of prosperity of society. The inflationary impact, among others:
1 Impact of Inflation on Equity Income 2 Impact of Inflation on Output Production
3 Encouraging Investment Speculative 4 Interest Rate Rises lead and Investment Will Reduce
5 Uncertainty raises economic situation in the Future 6 The problem raises Balance of Payments
6. Inflation Overcome
Following this, you will get to know some of the government policy in controlling inflation. Boediono, 1992:9
19 a. Monetary Policy
According to the classical monetary theory, inflation occurs because the addition of the money supply. Thus, theoretically relatively easy
to cope with inflation, by controlling the money supply itself. Monetary policy is the action taken by Bank Indonesia to reduce or
increase the amount of money in circulation. When the money supply too much so that inflation rose sharply, Bank Indonesia will soon
implement monetary policies to reduce the circulation of money. b. Fiscal Policy
How can fiscal policy to control inflation? As you know, fiscal policy is a policy relating to government revenue and expenditure. The
governments fiscal policy to reduce inflation is to reduce government spending; raising tax rates and holds government loans.
c. Non-Monetary Policy and Fiscal Non- In addition to monetary policy and fiscal policy, the government
policy of non-monetary non-fiscal with three ways of raising production, stabilize wages salaries, and security prices, as well as
the distribution of goods.
E. PREVIOUS RESEARCH
