Inflation And Its Effect On The Economy

Inflation is when there in an increase in price of goods and service, causing there to be a fall in the currency as lesser goods and services can be brought by each unit of currency due to the rise in price. Rapid economic growth will often lead to inflation. When the economy is rapidly growing, a company will need to employ more employees, resulting to a fall in unemployment rate. As unemployment rate falls, lesser people will be looking for jobs and the company will find it harder to fill up job vacancies. This will cause the salaries of the workers as well as company spending to increase, resulting in the company passing on the extra costs to the consumer. Together with the raise in salaries for the employees, they will have more to spend, resulting in an increase in an aggregate demand. All this will result in rapid economic growth, where the increase in price will cause inflation to occur.

The United States is slowly losing its economic stability due to the problem of inflation. Inflation is the general increase in prices and fall

1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?).

The United States inflation rates are a problem, if the government were to control them then the United States would flourish from a “B+” economy to a “A” economy. In the United States (September, 2015) consumer prices went up 1.5%,

1). In 2016, the inflation rate was at 2.07 percent, and as of February 2017 the rate is about .90 percent (“Inflation Rate,” n.d.). As we can see, the economy has bounced back from its position during the recession. GDP has increased drastically since 2009, unemployment has decreased past its position from 2007, the interest rate has risen, and inflation has also gone up which indicates a strong and healthy economy. Although a higher interest rate is unfavorable for consumers and businesses, it means that the government is confident that the economy will continue to improve. This also means that consumers have enough disposable income to spend on whatever they wish, so the government does not need to lower the rate in order to encourage borrowing and spending. These metrics indicate that the economy has recovered from the Great Recession, and is continuing to improve.

As the inflation rate rises, I will have to redistribute my income. I would have to be stricter with my spending habits compared to an economy that has a low inflation rate. As the prices of everything around me starts to go up, I will have to be able to adjust my spending habits to make sure that my necessities are taking care of and that I am still able to spend more. By the inflation rates going up, this can have a negative impact on some manufacturers. As inflation goes up, I will not be the only person in the economy cutting back on unnecessary spending and be stricter with my money. A perfect example is when the price of gas took a significant increase during the mid-2000s. Car manufactures started to see that people were spending less on purchasing cars. Another reason why I will have to stricter with my money after a significant increase in inflation rates is the idea that I may be impacted by a pay cut or completely laid off.

The Great Recession, December 2007 through June2009 marks an unstable 18 months for the United States’ economy, that countless amounts of people won’t forget. The housing and bank markets during the recession were not recouping much money off loans and low interest rates, which cause both markets to nearly crash. This caused many Americans to lose their jobs and the unemployment rates to reach the highest numbers since the Great Depression. But ever since 2009, the economy has been an on slow but steady track up to being what it once was.

From December 2007 to June 2009 the United States economy was confronted with its greatest challenge since the Great Depression. The financial crisis was so great that it was coined the term the Great Recession. Many factors contributed to the collapse of the U.S economy; such as, the financial crisis (2007–08), U.S. subprime mortgage crisis (2007–09), a shrinking Gross Domestic Product (GDP) growth rate and unpresented unemployment rates. A recent (2016) article in the Wall Street Journal entitled “Post-Recession Rethink: Growth Potential Dimmed Before Downturn” examines the economic aftermath of the Great Recession.

Inflation hinders economic growth. For example, when inflation is high, goods and services cost more, and people tend to spend less. High inflation also causes less long-term planning associated with spending money, such as home building and investing. Businesses are affected in the same manner. When inflation goes up, and down inconsistently, people become weary of spending, exacerbating their fears that they won’t be able to pay their bills. Long-term interests also go up, due to high inflation. The cost added to long-term interest rates compensates for the risk associated with inflation. Additional costs on interest rates make people less willing to take on a loan. When, the demand for goods and services is low, then the supply of goods up, the production of those goods has to decrease, giving rise to

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

The Great Recession, beginning in 2007 and ending around 2009, caused some serious repercussions on the United States economic system and left millions of jobs and housing at a stand still. Though a couple big business and stockholding companies caused this decline in the U.S., those businesses were the ones experiencing little to no cost for their actions.

Why is inflation bad for the American economy? Imagine going into the popular local food market or gas station several times a week. After a couple of weeks, imagine going into these stores and noticing the prices have steadily increased over the past few months. This is called inflation, and it is causing many problems in the United States. There are three different types of inflation: demand-pull, cost-push, and built-in. Demand-pull inflation occurs when prices increased because of such high demand. Cost-push inflation is when prices surge resulting from high input costs. Built-in inflation is when prices continue to rise after any natural causes. The inflation occurring in America is a demand-pull. Inflation has affected the United

In economics, inflation is explained as rise in the general level of prices of goods and services in an economy over a period of time. With the rise in price levels a

Inflation is the rise of priced goods and the fall in value of money. Deflation is when prices of good and services fall. We are concerned about both because they can harm the economy. In the video, “Inflation or Deflation?” by Merle Hazard, he asks if the banks will the central bank get traction soon or will it lose its grip? In regards to being in a recession, Hazard is questioning if the banks will be able to control what is happening or will it crash which happened in the Great Depression. He also continues to describe how the government prints more money to compensate for the prices which is inflation. Hazard also asks if the dollars in his mattress, will buy

Inflation is used to describe a sustained increase in the general price level for services and goods. When inflation increases, every dollar that an individual owns buys a lesser percentage or proportion of a service or good. In most cases, inflation is caused by an imbalance between supply and demand of money, changes in distribution and production cost, or when the level of tax imposed on products and services is increased. In times when a country’s economyexperiences inflation, the value of its currency reduces. This has a negative effect on the quantity of goods and services demanded because each unit of currency is able to purchase fewer goods and services. Inflation yields the worst impact on potential consumers because it becomes extremely difficult for them to access or buy basic commodities required for survival. To enhance their ability in purchasing basic commodities, consumers seek for high-income increase from their respective employers (Hall, 2009).