Inflation - Research Paper Example

Comments (1) Cite this document
The reason inflation is so influential is because inflation affects the purchasing power of money. For example if a person is able to purchase $1 of goods today and a year later the national inflation rate is 10% that person would only be able to purchase 90% of the goods a year later with a $1. …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER95.3% of users find it useful
Read TextPreview

Extract of sample

The effect of inflation is that it makes your money be worth less. Inflation affects more poor people because this group of individuals has limited resources.
Inflation affects the consumer markets as well as the money markets. The money market is where the government sells treasury stocks and bonds and where corporations sell corporate bonds. The interest rate influences the money markets because when interest goes up companies are forced to offer higher bond coupons rates in order to attract investors. The bonds of corporations are rated by agencies such as Moody’s. Take for example a company that sells bonds. The company is offering bonds that pay 8%. The inflation rate of the nation is 5%. The investor gets a net return of 3% after deducting inflation from the coupon rate. Suddenly the interest rate of the nation goes up to 9%. Based on those circumstances the corporation cannot sell bonds at 8% because nobody would buy them since the bonds have a net loss of 1% after inflation is deducted.
The inflation rate in a country affects the amount of interest that people earn in their savings and checking accounts. When inflation goes up banks are forced to pay higher interest rates to provide value to their customers. Different age demographics are affected more than others by inflation. The elderly are affected a lot by inflation. The reason that the elderly get hurt more than others is because most pension funds pay fixed payments. If a person gets a $600 for the rest of their lives as time passes that pension become less valuable because inflation is deducing the buying power of the $600. The federal government realizes the impact inflation has on the elderly and in their social security system there is a safeguard protocol that protects the beneficiaries. The payments of social security are adjusted each year to offset the effects of inflation. Another reason the elderly are affected a lot by inflation is because the elderly spend a lot of money on medical expenses. The inflation rate in the medical field is approximately 10%. The inflation varies by goods and industries. When inflation occurs in food prices the lower class is affected the most because poor people have limited income to pay to its food necessities. The amount of inflation in an economy depends on the country. In the United States the inflation rate as of February 2011 was 2.1% (Tradingeconomics). Historically the United States has always had a low inflation rate. There are parts countries in this world that have been completely destabilized by the effects of inflation. A phenomenon in economics known as hyperinflation can destroy an economic system. Hyperinflation can be defined as extreme or excessive inflation. A country that is currently going through a hyperinflation crisis is Zimbabwe. Two other countries that have suffered through hyperinflation in the past are Argentina and Russia. In the past the cost of living was much lower. We have heard stories how our grandparents used to pay a few pennies for a can of coke or a pound of bread. Through the passage of time things have gotten much more expensive. Despite lower wages our ancestors had great wealth because they could buy more goods and services with less money. During those years owning land and homes was more accessible because prices were much lower. When inflation goes up in the United States the Federal Reserve can take measures to control inflation. This is called monetary policies. The current chairman of the FED is Ben Bernanke. Inflation is an economic variable that Read More
Cite this document
  • APA
  • MLA
(“Inflation Research Paper Example | Topics and Well Written Essays - 750 words - 1”, n.d.)
Retrieved from
(Inflation Research Paper Example | Topics and Well Written Essays - 750 Words - 1)
“Inflation Research Paper Example | Topics and Well Written Essays - 750 Words - 1”, n.d.
  • Cited: 0 times
Comments (1)
Click to create a comment or rate a document
edna60 added comment 5 months ago
Student rated this paper as
I didn’t know how to start my essay. "Inflation" helped me out a lot! Especially the list of resources was valuable.
...Inflation This is a very crucial term when talking about monetary issues. This is so because it is a phenomenon that affects money-related issues every now and then. Before going any further it is of essence to understand first what the term refers to. Simply put, inflation refers to the rise in the prices of goods and services in a given economy for a given period of time. When such a thing happens, it therefore means that each unit of currency in that particular economy buys fewer goods than what it could have purchased initially before the inflation. It is of importance to know that the concept of inflation is just not something that came about the other day but in...
3 Pages(750 words)Research Paper
...INFLATION The concept if inflation is indeed an important component considering how it influences many aspects of life. The paper seeks to delve into the causes of inflation in order to illuminate the factors which lead to the persistent increase in the prices. In the same way, it will provide an analysis into some of the effects of inflation while focusing on the different types of inflation arising from different economic situations. Introduction Inflation is described to be a rate in which the overall price of goods and services is increasing while the purchasing power decreases in an economy (Nicholson 57). Inflation...
5 Pages(1250 words)Essay
... Inflation Inflation is defined as the rise of the level prices of goods and services in a given economy over a certain period of time. In the event of an inflation or the rise of prices of goods and services in a given economy, the purchasing power of a given currency is diminished to the effect that it will now require more units of money for the same goods and services purchased or the number of goods and services purchased with the same amount of money is reduced. In effect, inflation is the loss or the diminishing of value of money in a given economy (Blanchard 45). In plain language, inflation is the instance where goods and services get expensive or the phenomena where people complain that the price of commodities is rising... ....
3 Pages(750 words)Essay
...? Macro & Micro economics: Inflation Introduction Inflation is the of an economy when the general price level in the economy rises due to the falling value of money. This term involves a wide range of variables and does not have any fixed satisfactory definition. In common usage inflation refers to the state of the economy when the money supply is much higher than the physical quantity of goods available in the economy. According to Keynes, inflation refers to that phase of rise in the general price level after the output in the economy grows beyond the full employment level of output (Frisch, 1983). Inflation defined in this way refers to monetary...
6 Pages(1500 words)Essay
...? Inflation In an economy, there are times at which goods and services cost rises so that a unit currency will buy less than a previous time when it could buy more. With this general increase in the price of commodities, the currency in use losses it high purchasing power and weakens in relation to the prevailing conditions of the economy (Berlatsky, 2013, p5). The effects of inflation can affect an economy in positive and negative ways or both positively and negatively simultaneously because it affects the differently. In many circumstances, there are different explanations that could be given to the rise of inflation in an economy and which could explain the reasons why a currency can...
6 Pages(1500 words)Essay
...Inflation: An overview: Techniques on which success of a business in modern world relies differ considerably from the ones followed in the past. Thisis because the international market today, is controlled / influenced by things more than just owner’s equity, project feasibility considering the socio-political environment prevailing in the country, mood of the market, availability of shares and an awareness of marketing and business strategies. Whole world is going through a phase of economic recession. Despite much progress in the development of sound marketing strategies, increasing reliability on the use of technology to estimate future plans, widespread awareness of the economic decision making processes, readily...
6 Pages(1500 words)Essay
...21 March Importance of Price Stability in an Economy with respect to Inflation and High Rising Prices No consumer on this planet would like a situation of dealing with fluctuating prices with respect to the goods and services sold in the market. Stable prices eliminate all kinds of doubt and confusion on the part of the customer, while making it important for the producer to fix his costs and bring about cost effectiveness while trying to retain a certain amount of profit. In an economy, general price levels when stable are of keen interest to the consumers, thus. However, actual price stability refers to a situation when the prices of the goods and services do not change for a prolonged period of time. The general...
6 Pages(1500 words)Essay
...INFLATION: A HIDDEN TAX? Term Paper April 16, 2064 Words   This paper focuses on inflation, what it is and how it affects economy. It discusses the broader definition, factors causing inflation and how it can be estimated using indicators. This paper also outlines a detailed discussion of the effects inflation with respect to economic development, economy growth as well as on the society. This discussion concludes by outlining control measures necessary to manage inflation and the alternatives polices that can be taken by the government to manage inflation. Introduction Inflation refers to increment of price levels in...
7 Pages(1750 words)Essay
...of competitiveness, reduction of budget deficit, increase employment rates, and aid in economic recovery. Since economic recovery is the key to reduction in budget deficit. He suggested that Countries should stop the use of the Euro and maintain their own currency. Most countries agree that the renewal of the economic growth is vital in saving the Euro (Pettinger, 2012; Pg. 68). The obstacle is that the effects of steps such as having a banking union, the recently agreed rescue plan may have positive effects to the banking system but may not have any effect to raise the competitiveness in the region’s economies. The second option was inflation, where the country should try to boost the demand in her economy in order to...
5 Pages(1250 words)Literature review
...Article Summary 11th May Rise of India as an Economic Powerhouse India is expected to emerge on top of the other BRIC nations, they are; Brazil, Russia, and China. This emergence can be attributed to the election of a government that is pro-business in last year’s election. Since India attained her independence, the economic history can be divided into two phases. The 1947 to 1991 phase and the one after 1991(Picardo, 2015). The Indian economy was faced with internal issues that included; war, religious riots, shattered economy, poverty and high illiteracy levels. These issues were pivotal in shaping the country’s socialist economic policies. This led the country to rely less on imports and, therefore, encouraged self-reliance... Summary 11th ...
2 Pages(500 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Let us find you another Research Paper on topic Inflation for FREE!
Contact Us