The Effects Of Inflation On The Economy

There are many of us out there that constantly ask ourselves, “how exactly does the U.S. economy work?” During an inflation we might conclude that we have an Economic problem, on the other hand, if we have a huge increase of jobs; we might then conclude that as an economy we are doing a good job. There are many factors that one needs to consider in order to come to a conclusion on whether we are doing a good or bad job in the economy. I will be touching base on some of the various microeconomics tools that we can use to describe the changes in supply or demand. I will also be discussing the history behind this material and the governments involvement behind this process. We all use the laws of supply

Consequently, Keynes brought clarity to the subject of the Great Depression and unemployment, his argument suggested that unemployment may not be a temporary condition that the system could naturally recover. Keynes believed that unemployment could in fact reach equilibrium. In this article the Depression was seen as a condition of unemployment brought about a

Ronald Reagan once said, “ In a world wracked by hatred, economic crisis, and political tension, America remains mankind's best hope.”America may be mankind’s best hope, but will it remain that way? America is the beacon for freedom and equality, but with the recent election, it may difficult for us to remain a country full of diversity and hope. In order for the United States economy to prosper, the government must control inflation rates, raise employment rates, and change the current income inequality ratio.

Stagflation is a word used to describe both a stagnant economy coupled with inflationary prices. To understand the reasons for this event, the United States global economy must be brought into the picture. Once the leading producer of many exported goods, in 1971, the United States reached a trade deficit. This meant that for the first time in history we were importing more goods than what was being exported. Shortly following this shift in economic power, OPEC implemented an Oil Embargo in 1973, directly affecting America. The price of oil quadrupled which caused prices of most other consumer goods to drive up. With these two together, all Americans felt the repercussions in several ways. The annual rate of inflation rose to 10% during the 1970’s, unemployment soared to nearly 9%, and real wages peaked. Ever since the early 1970’s, real wages have been on a decline, plunging the middle class further into debt. Even with wages flattening out, consumption has not. To make up for this, many Americans have cut back on their savings in order to maintain the suburban lifestyle they became so acquainted with. People became less concerned with saving for their family’s future, but on being able to keep the property and lifestyle they naively invested in. College funds became a needle in a hay stack for most children, forced come up with

This is because under wage controls workers could no longer get raises, giving them less money to buy goods and services, which as a result decreases demand. Businesses couldn’t lower prices to boost demand. Neither could they raise prices, even though the cost of their imported materials rose due to inflation and import taxes. Since they couldn 't lower wages, they reduced hiring and therefore demand. Wage price controls created a recession in November of 1973. Nixon eliminated them in April 1974, but the damage took its toll. There were three consecutive quarters of negative GDP growth: 1974 Q3 -3.8% (-3.8%), Q4 -1.6% (-1.6%), 1975 Q1 -4.7%(-4.7%). Unemployment reached a peak of 9% in May 1975, two months after the recession technically ended.

However, the oil crisis of 1979 changed that picture. Higher inflation and higher interest rates resulted. Jobs started disappearing. Economic growth first slowed then declined. Gasoline shortages developed. By the end of 1979, inflation

The American economy in the decade from 1970-1979 was a mess. It was so bad that it was named “The Great Inflation of the 1970s”. The Vietnam War was still ongoing and the American people were worried. The main areas of concern for the American people during the 1970s were high unemployment, rising inflation, the energy crisis and an economic recession.

The 1980-1982 Double Dip recession brings up the curiosity of how the stagflation of the seventy’s affected the early eighty’s in which it caused the Fed and the USA congress to be switching back and forth from stimulus and restraints causing us to fall to our first recession. Then not till later we will see that Paul Voucher Chairman of the Board of Governors use heavy monetary restraints to control the inflation and ending the first recession only to ending up pushing us back into the second recession of our Double Dip.

The Vietnam War also caused American economic instability – Johnson's government financed the war without heightening the taxes, which increased the deficit. The government enlarged amounts of money in circulation and therefore started a strong inflation of prices. The growth of inflation has begun in year 1967, when it reached three percent. In the year 1973 it was already nine percent and it exceeded twelve percent only one year later. The unemployment was, in the beginning of Nixon's governing season, 3.3 percent, but it grew to six percent in the year 1970. The economy was being destroyed for the rest of the decade.

In this debate, both Jimmy Carter and Ronald Reagan made several claims related to inflation. Carter claimed he had established polices in his first term that brought down inflation, while creating 9 million jobs. To support this, he declared inflation fell from 18 percent in the first quarter of the year to 7 percent in the third quarter. Carter also claimed he was working on an economic revitalization program that would reduce tax credits to encourage businesses to invest in new tools and factories, resulting in increased productivity and more new jobs. In addition, he claimed some economists had called Reagan’s competing plan "irresponsible” and that it would increase inflation. However, he failed to explain why this was the case. He also

The American economy was negatively affected by inflation. Prices continued to go up rapidly and the idea of a recession was undergoing speculation. Fortunately this didn’t last long and was resolved towards the middle of the 1950s (Economy).

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.

Hyperinflation as the word suggests is a situation where inflation is excessively high. This phenomenon has many consequences in an economy. Through history, there has been numerous cases of hyperinflation that have had negative repercussions in the economy of these countries and the international market. In the actuality, Venezuela has the highest inflation rate in the world. Due to various political and economic problems, Venezuela’s inflation rate for the year of 2015 was of 180.9% ("Venezuela | Economic Indicators") which is extremely high compared to other countries. The South American country is living a stage of political division, social problems and alarming economic rates. Many attribute these problems to the political decisions of the current and former presidents, Nicolás Maduro and Hugo Chávez respectively, who have been involved in various rumors for corruption. For instance, Maduro achieved the approval of a law that permits him to legislate above the Venezuelan National Assembly, who is the legislative power of the country. This change, allowed him to make decisions over the market, controlling things such as price, profit and exchange rates, while inflation was constantly rising. The president argued that this decisions were made to ensure freedom and economic rights. Furthermore, other factors in the international market also affected Venezuela. The decrease in the price of the petrol affects them directly since a high percentage of their economy is based

There are different influences that cause inflation such as energy, food, commodities, and other goods and services. The entire economy is affected by rise of the cost of living. It also affects the cost of operating a business, borrowing money, mortgages, corporate and government bond yields, and every other aspect of the economy. There are several advantages of inflation in the economy. Some include moderate rates of inflation which allows prices to adjust. This is considered a sign of a healthy economy. With economic growth available we usually get a generous amount of inflation. Also moderate inflation rate reduces the actual value of debt. If there is a reduction, the real value of debt increase leads to a squeeze on usuable income.

Discuss the role of government policy in reducing unemployment and inflation. In your discussion make use of the diagrammatic representation of the macroeconomy developed in lectures in Term 2