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At the moment globally there has been a spike in food prices. One of the causes has been the severe droughts in the United states which have driven up the food prices. In response to this inflation the government of Brazil decided to reduce taxes on basic household goods to support an economic recovery. This action also leads to stabler prices, which is one of the macro-economic goals of a country. The tax break on household goods allows for a increase in consumption as consumers will feel wealthier and have an increase in purchasing power. As a result this will increase Brazil's GDP to a certain extent as Consumption is one of the factors that influence the gross national product. 

The global rise in food prices, caused by a drought in the US, has increased Brazil's inflation, along with the government trying to put a stop to the currency gains. Due to bad weather conditions, the tomato industry has been affected, and has lead to an increase in the price of tomatoes. With global prices on the rise, there is less want to import goods, but with inflation in Brazil, high food prices all around is hurting its economy. Currency gains are also having a negative affect which is hurting industrial competitiveness. Consumers are finding it difficult to cope with rising food prices and in the short run will mean that a lot of their earnings are being spent on necessities and not spending on luxuries. Low unemployment is pushing up wages, and with interest rates being cut, people will most likely try and save their money.

Brazil's President Dilm Rousseff a 66 billion dollar stimulus plan to revive the country road and transport systems in order to bolster the economy. The government predicts a growth of 3% in 2012, down from the 4.5% growth in 2011. In order to maintain the GDP growth at what it was the previous year the government plans to invest 66 billion dollars into the country transport system in order to promote jobs and growth within the country. As this is not a transfer payment (tax revenue redistributed to pensioners, veteran, and the unemployed) the government is contributing to the economies gross domestic product. This stimulus plan would go to wages of the people working on the transport system and the purchase of capital goods necessary to make the improvements. In order to maintain the GDP per capita in Brazil it is necessary for the economy to grow at the same rate as the population.

This article describes how the Brazilian government tries to increase investment and consumption through tax cuts. In particular on trucks, machinery, and automobiles the government reduces or gives an extension on the taxes. Another measure to stimulate investment in the country is via reducing its interest rate to an all-time low of 7.5 %. 

As we know, inflation is a rise in price levels. In India at the moment, there is a slide in the value of the rupee, and simultaneously food, fuel and manufactured items are raising in price, leading in a high inflation. This is an exmple of stagflation becuase it is a 'cost-push' inflation (inflation caused by rising costs of products).  In India, the inflation rate was expected to rise 6.7% (by economists) but it actually rose 7.23%.