Inflation and Government Economic Policies

The term `inflation' defines a situation in which prices are rising and the value of money is falling. The cause of inflation is due to too much money in the economy ben printed and the high rise in demand. too few goods. An inflationary spiral tends to set in. Increasing prices produce a demand for higher wages: higher wages mean that goods cost more to produce: prices must go up again to pay for the wage increases.

Demand-pull inflation happens when there is an extreme amount of demand for products and services. This is a result of an increase in the money supply by the central bank system. Consumers then have the ability to demand more of the products they want. Cost-push

Consumer price index (CPI): According to the Bureau of Labor Statistics, CPI is a “measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services”. Our data was collected from the Organization for Economic Co-operation and Development because theirs was quarterly and not seasonally adjusted.

Economic inflation is large issue that tends to take place everywhere, this has even appeared in the early days of the United States. To be exact, inflation is the rise sustained in the general level of cost on services and goods over time in an economy. When the cost level grows the unit of currency buys less services and goods. Some causes for inflation include: push in profit, productivity decline, increase in house prices and the printing of more money. Often times these result in services and goods becoming less affordable due to an increase in prices.

Implication of middle class American consumers has higher income and spends more. According to C. Bartlett and P. Beamish, Americans spend 25 percent less on food and transportation compared to countries such as China and India who spends about

For example one year pizza Margarita costs $10 and pizza Pepperoni costs $12, consumers will buy more Margarita then Pepperoni. But the next year the price of pizza Margarita rises and Pepperoni’s price falls, in this way consumers will buy chipper pizza. But when computing CPI the number of goods is fixed and in this way the index will show rise of the cost of living, but in reality the increase is lower.

Changes in Consumer Price Index are used to assess price changes associated with the cost of living ("Consumer Price Index | Investopedia”). From the data I collected the Consumer Price Index has been steadily increasing from the years 2005 to 2014, but in 2015 the Consumer Price Index has decreased by 109.719, in 2014 the Consumer Price Index Average was 236.736 then in 2015 the Consumer Price Index Average dropped to 127.017.

Changes in Consumer Price Index are used to assess price changes associated with the cost of living ("Consumer Price Index | Investopedia”). From the data I collected the Consumer Price Index has been steadily increasing from the years 2005 to 2014, but in 2015 the Consumer Price Index has decreased by 109.719, in 2014 the Consumer Price Index Average was 236.736 then in 2015 the Consumer Price Index Average dropped to 127.017.

Consumer goods are on the rise and CPI going up 0.2% in March 2014. What is causing this rise? According to the Bureau of Labor Statistics, “Increase in the shelter and foods cost accounted for most of the rise.” (CNNMoney) Everything from beef, milk, vegetables, medical care, clothing, and airline fares are increased. Joel Naroff, president and chief economist, said “Today’s report shows that prices seem well contained, unless, of course you had to go out and buy food or heat your house.” (CNNMoney) Today I will discuss how consumer price index, inflation is affecting our economy.

The second part we will talk about the inflation. Inflation is the rising price of goods and services over time. It 's an economics term that means you must spend more to fill your gas tank, buy a gallon of milk, or get a haircut. That increases your cost of living (Amadeo, 2016). Inflation make our money value reduced if we compared in the past Dollar’s value higher than now. For example, before people can buy a gallon of gas 94¢ but now a gallon of gas over $2.00. Inflation rate also can increase or decrease of prices during a month or a year thus no one cannot be guaranteed. That’s why President Reagan said, “Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man."(Amadeo, 2016).

Inflation refers to situation where there is sustained increase in the general price. One of an economic principle, people always thinks of margin, people are rational in fact; people will purchase something that gives the maximum satisfaction. Stable economic environment is important for making economic decision whereby it brings high benefits. In other words, it is highly believed that an even inflationary situation is extremely important. Since inflation is hardly predictable, low rate inflation

Inflation is a sustained increase in the general level of prices for goods and services

On the one hand, RPI is the percentage price calculated by the Government annually, where they take more than 600 goods and services, and they calculate a mean price of them. After that, they compare it with the previous year.

This is the overall cost of goods and services that are bought by an average consumer. This index is used in measuring the cost of living over a given period of time. When there is a rise in consumer price index, a typical family has to spend more money in order to maintain their standard of living. Inflation is a term that is used to describe a situation where the overall price level of an economy is rising (Mankiw, 2008).

Parkin (2012: 522) described inflation as “a persistently rising price level” and price level as “the average level of prices, and the value of money”. A price increase would cause people to buy less, and a decrease in demand for products would cause prices to fall. Parkin (2012) said that expected inflation is promoting a healthy and a strong