Battling Inflation Essay - 1599 Words

As prices begin to rise in various sectors of the economy, some businesses are continuing to tread lightly. Keeping costs down has assisted the US economy in balancing the control of inflation better than other countries emerging from the global recession, such as China and Europe. But with the US economy still recovering and inflation rates in other nations rising the concern of slipping back into another recession has become a very real issue. Factors such as supply and demand, price elasticity and inflation are all contributing factors to the outcome. Perhaps one of the most basic, and essential, concepts of economics is supply and demand. The law of supply and demand states that the price of any good adjusts to bring the quantity†¦show more content†¦Trade balance is â€Å"the ratio of imported and exported goods†¦the balance is active if the export goods costs exceed the import goods costs (surplus), otherwise the balance is passive (shortfall)† (Forex, 2011). Globalization has assisted in keeping down the cost of inflation by providing low cost imports from countries such as China by means of low wages. In recent years developing markets have started to become huge consumers of commodities, which is finally putting upward pressure on American prices for many globally traded goods† (Hilsenrath, 2011). Historically, the United States has been a nation of consumerism. Columnist Anup Shah (2010) asserts that consumption trends in the US follow the 80-20 rule, stating that â€Å"the wealthiest 20% of the world accounted for 76.6% of total private consumption†. However, consumerism in the United States doesn’t stop there. Because consumers have become so accustomed to certain norms it can be difficult to determine necessity from commodity. Some items, such as Starbucks, are sometimes put into the same category as necessities, such as gasoline. Economists use the Consumer Price Index (CPI) to measure consumer spending habits and the change in inflation rates. Some have even likened the CPI to â€Å"a tug of war between the prices of goods and the prices of services, playing out beneath the surface† (Hilsenrath, 2011). For years foreign investment has enabled the US to â€Å"have their cake andShow MoreRelatedInsight From Theory And History1638 Words   |  7 Pages(monetary policy). In regards to inflation and battling recession Friedman argues that inflation is strictly a monetary induced issue. By battling inflation through the Keynesian method, where money is pumped into the economy to encourage spending, this in Friedman’s eyes would continue to drive up inflation. In order to reduce inflation and avoid recession Friedman believed that bank regulation of prices and interest rates, this would not only regulate inflation but other recession issues wouldRead MoreThe Brazilian Economy And Government1018 Words   |  5 Pagesthe 1980s to the 1990s Brazil experienced widespread inflation, leading to the devaluation of the Brazilian currency. This in turn hindered efforts at economic expansion and growth. The politicians and economists of the time did not know how to stop inflation from gro wing, and the GDP of Brazil in the 1990s fell by more than 80 percent, hitting an all-time low. In addition to monetary problems, like other South American countries Brazil was battling high rates of government corruption. In fact PresidentRead MoreThe Federal Reserve System Is The Central Banking System Of The United States1459 Words   |  6 PagesTo serve as the central bank for the United States †¢ To address the problem of banking hardships and panics †¢ To manage the nation s money supply through monetary policy 1. Increase employment 2. Stabilize prices, including prevention of either inflation or deflation 3. Monitor long-term interest rates †¢ To create a balance between private interests banks and the centralized government 1. To oversee and normalize banking institutions 2. To look after the credit rights of consumers †¢ To strengthenRead MoreGovernment Policies And Strategies For Economic Growth And Development1458 Words   |  6 Pagesthe beginning of 1994, a specific set of events composing of different policies were undertaken to stabilise the economy of Brazil during times of high inflation % rates. This set of events was called the Plano Real. Aim: It aimed to, in nominal terms, stabilise domestic currency after a succession of failed measures in attempt to control inflation by introducing a new real currency to be replace the cruzeiro real. Impact: The Plano Real created a unit of real value which aided the introduction ofRead MoreInflation Can Be Measured By Consumer Price Index Or Cpi?1726 Words   |  7 Pagesseems impossible, prices fluctuate on a daily basis. This price fluctuation is known as inflation. Inflation is a continual escalation in the aggregate or general price level in an economy. In simpler terms, it means there is an increase in the cost of living and that your money might not buy as much today as it could in earlier times. To fully understand inflation one must know how it is calculated. Inflation can be measured by evaluating the Consumer Price Index or CPI. Doing so shows what the increaseRead MoreNews Report From The Massachusetts Institute Of Technology1322 Words   |  6 PagesReporter: We have some breaking news to report from the Massachusetts Institute of Technology. We have just been informed that long time economist and Professor Paul Samuelson has passed away at the age of 94 after battling an undisclosed illness. Samuelson has impacted the school of MIT greatly as he is a contributor to their highly prestigious economic department. His independent influence in economics has also been wide spread and will continue to be long-standing in the field of economics. WeRead MoreFiscal and Monetary Policies During the 2008 Recession in America967 Words   |  4 Pagesrecessions, the economy lies in a period of poor industries and increasing unemployment rate. This scenario is very unhealthy for the country’s economy and people. Poor industries will lead to unemployment, low total output and in effect would cause inflation. It is not right to view the effects all in quantitative approach; we should also see where these events would lead us. With high prices of commodities and low income or no work, distress among citizens is likely to occur. Dysfunctional communityRead MoreHigh Oil Prices And The Russian Economy1429 Words   |  6 Pagesthat economic recession could come back to Russia. Crumbling Russian ruble and dwindling exports slashed 2014 Russian GDP, and its GDP will fall lower than Spain or South Korea. Without serious police changes or development of technology, already battling Russian economy will be much worse place than 2014. The Russian economy suffers from three severe blows: debilitating structural policies and strict financial sanctions from the West, and continually falling oil price. Russia has sustained significantRead MoreInvestment Objectives And Beliefs At Investus2362 Words   |  10 Pagesin growth has put downward pressure on oil prices resulting in lowering inflation, which should consequently boost household budgets. However, these market conditions could prompt the Bank of England to maintain interest rates at a record low. Oil Declining oil prices have resulted in inflation levels being the lowest witnessed since the Great Depression. The last year is set to be the first year since 1932 where inflation levels were below 2pc in every economy in the G7. Brent Crude was moreRead More Accomplish Victory2010 Words   |  9 PagesThe cause is usually the result from poor money managing from the people managing the money. â€Å"The FED deals with these situations by dumping huge amounts of money supply into the money market. This helps to keep interest rates low even as inflation rises. Inflation is the rise in the prices of goods and services over a period of time.† (22) FED stands for Federal Reserve System, or office. The stimulus package was very poor managed. â€Å"The stimulus package was not as big as some people say the reason