Deflation And Inflation

Another cause for the decline in oil prices is caused by an increase in consumers purchasing more fuel efficient vehicles, such as hybrid or electric vehicles. In many countries today, especially in North America, there has been an increased demand for fuel efficient vehicles. This is evident in TV commercials which are advertising more and more vehicles that get 40 to 50 miles per gallon, and by the ever increasing commercials for electric vehicles. Consumers are tired of paying outrageous prices for oil and are demanding more for their money. As this demand continues to grow, the demand for oil will decrease.

Some of you might not know what deflation means. Deflation means that prices go down on goods, but deflation is not good. When products of prices go down usually the business suffers and they have to fire people or give them lower wages.

The demand of gasoline has increased steadily over the last twenty years. In 1981 the U.S. averaged 6.5 million barrels of gasoline consumption per day. By comparison, in 2004 the U.S. averaged 9.2 million barrels of gasoline consumption per day. For most of this time period, gas prices stayed relatively the same. This is because the U.S. refineries increased their production to meet the demand and maintain the equilibrium price. Also during this same time period worldwide demand for crude oil increased 27%. Crude oil producers also increased their production to meet the demand keeping prices the same.

The United States consumes more than 25% of the world’s petroleum products which is a large percentage, considering only 3% of the world’s oil reserves are produced by the United States. Given the demand for petroleum products such as gasoline, understanding why Crude oil prices have skyrocketed in recent years, is not hard. According to the article “Ending America’s Oil Addiction,” the surge in crude oil prices can be reduced in large part to the simple concepts of supply and demand. (Cooper, 2008)

In economics, with the inflation is a rise in the actual general level of prices of goods and services in an economy from over a period of time. When the general price level rise, such as each of the units currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power4 per unit of money. This therefore means that with the loss of real value in the medium of exchange and unit of account within the given and actual economy. With a chief measure for example and the price of inflation is within the given inflation rate, the annualised percentage change within a general price index over time in which is normally the consumer price index.

When is the last time we experienced deflation (prices actually dropped- you will have to go back a few decades)?

If a retailer prices its gasoline too high, and without regard to competition, the retailer's customers may take their business to another station with lower prices. If a retailer loses enough volume, the retailer may then reduce prices in order to retain its customers. When more people are on the road, typically in the summer months or during holidays, the price will increase. Crude oil is the greatest contributing factor when it comes to the price of gasoline. The resources it takes to remove it from the ground, then transport it, and then refine it are the factors involved in pricing. The Organization of the Petroleum Exporting Countries has a big part in the price as well in both in the United States and around the world. Speculation of oil commodities can also affect the gasoline market. The second major factor that contributes to gasoline prices is refining. Oil refining is done by heating the oil with steam and only about 40 percent of what remains is gasoline. To produce more refineries must chemically change some of the other products that were produced. Distribution and marketing makes up the remaining 5%. The price of transporting crude oil to a refinery then gasoline to a point of distribution is passed on to the consumer. In addition the price to market the fuel brand is passed on to the consumer as well. Other factors affect gasoline prices such as extreme weather, war or natural disaster in areas where oil is produced can also in turn

The downward spiral of the United States economy can be caused by different factors. For example, record high gas prices and sub prime mortgage loans are tow key contributors. With the United States gas prices and unemployment rates at an all time high, it is no secret why consumers naturally spend less money. Consumers are using more money for their gas tanks just to get to work everyday, and the though of going on vacation or shopping is just a dream now for most. A higher price level reduces the purchasing power of the public's accumulated savings account balances (Aggregate demand and aggregate supply, 2012). A higher price level heavily wears out the purchasing power of such assets, the general public is much poorer and will automatically reduce its spending.

The economy has been turbulent over the last few years, to say the least. Nearly everyone has been affected in one way or another. The article entitled “U.S. Consumer Prices Held in Check in January” describes the current economic situation in the United States and even abroad. At one point in time deflation was among the many concerns on everyone’s mind, but the article states that deflationary worries can now be a thing of the past. In fact, consumer prices are now on the rise which can largely be tied to rising energy prices. There are many macroeconomic indices which are touched upon in the article. The primary focus of the article is consumer price index (CPI), which has increased $1.6% over the last twelve months (Hauser, 2011). In

Within the last year, oil prices in the United States have dropped significantly. As oil drilling in the United States has reached its highest level in over 30 years, consumers are reaping the benefits. Among these gains are record-low prices at the pump, and cheaper oil to heat homes. However, oil prices did not just drop on their own; multiple factors contributed to the fall. Increased domestic production, declining global demand, and competition from other oil-producing nations had led to rapidly dropping oil prices across the United States.

Though most consumers may not realize it, the price of oil is not the primary determination for gasoline prices. It is more complicated that what most consumer may realize. The price of gasoline is determined by a number of variables. Things such as the supply, demand, inflation and taxes. Thought most consumer think that demand is the main reason for the increase of gas price they would be mistake. It does play a part, but there are larger variables that have a greater hand in the increase of prices. Taxation and inflation can make more significant increase than the demand of gas. This became for evident doing the US recent recession when gas prices skyrocketed due to oil demand and supply. Most states gave consumer a large relief by waving gas tax for

Deflation is caused due to consumer high expectation for price to decrease, which results in present day saving to buy items in the future. The quantitative data demonstrates a decline in the gross domestic product, which is reasonable as consumers consume less. Also, faith plays a major role, because consumers believes the result that the price does get lower, which they would expect the price to be even lower in the future. Consequently, faith and reason gives credit to the credibility and reliability of the quantitative data, yet it could lead to financial crisis that would need more quantitative or qualitative data to be persuasive to the consumers and alter their expectation to believe that the price of goods and services would rise in the future so that they would start to consume and bring up the economy. Hence reason and faith give credits to the quantitative and qualitative data in the economy, yet is possible to lead to severe financial

The relationship between inflation and unemployment is a topic, which has been debated by economists for decades. It is this debate that has made the opinions about it evolve. In this essay, the controversial topic will be discussed by viewing different economists’ opinions on that according to time sequencing.

Inflation; ‘a situation in which prices rise in order to keep up with increased production costs… result[ing] [in] the purchasing power of money fall[ing]’ (Collin:101) is quickly becoming a problem for the government of the United Kingdom in these post-recession years. The economic recovery, essential to the wellbeing of the British economy, may be in jeopardy as inflation continues to rise, reducing the purchasing power of the public. This, in turn, reduces demand for goods and services, and could potentially plummet the UK back into recession. This essay discusses the causes of inflation, policy options available to the UK government and the Bank of England (the central bank of the UK responsible for monetary policy), and the effects

Core inflation is the price change of goods and services minus food and energy. It’s measured by two indexes; CPI, consumer price index and PCE, personal consumption expenditures. The accumulation of a consumer’s monthly spending; can signal a change in inflation. In this document, I want to show how consumer spending can cause inflation and explain how inflation is monitored and measured.