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.
Nobody downloaded yet

Inflation in the United States - Essay Example

Comments (0)
Inflation is one of the most widely discussed topics in macroeconomics in the US economy. This is because consumers are concerned about the increasing costs of goods and services. In addition, the cost of production is constantly rising owing to the rising cost of raw materials…
Download full paper
Inflation in the United States
Read TextPreview

Extract of sample
Inflation in the United States

Download file to see previous pages... Inflation in the United States

Inflation affects the lives of all citizens in the US economy yet not everyone has the same purchasing power and income. It is therefore important for us to understand the causes of inflation, its effects and some actions taken by the government to regulate it. There has been a wide range of literature on the causes of inflation in history. There are different schools of thought on the causes of inflation. They are commonly divided into quantity theories of inflation and quality theories of inflation (Cate 96). The quantity theory of inflation is based on the quantity of money equation. On the other hand, the quality theory of is based on the sellers expectations to exchange currency at a later date. Presently, the quantity of the theory money theory is widely accepted as the inflation model in the long- run. This paper shall explore the causes of inflation based on three major theories, the Keynesian view, the rational expectations theory and the monetarist theory. The Keynesian view asserts that changes in money supply in the economy do not directly affect the prices of goods and services, inflation results from economic pressures that are manifested in the increases prices of goods and services. According to Robert J. Gordon’s triangle model, there are three main types of inflation: demand- pull inflation, monetary expansion and cost-push inflation. (Cate 141). Demand- pull inflation is the most common and it describes a situation where the demand of goods increases over and above the supply. Sellers increase the prices of goods, as they know that they have the liberty to do so. There are numerous circumstances resulting to demand pull inflation the most important being an expanding economy. This type of inflation could lead to economic growth as long as it is within the right limits. Since people expect increasing inflation rates, they make increasing purchases to avoid price increases in future. Cost-push inflation is caused by a drop in the aggregate supply. This may have been as a result of an increase in the prices of inputs and natural disasters. Finally, built in inflation is caused by adaptive spirals that are relate to shifts in prices or wages. An important concept in this theory is the relationship between unemployment and inflation that is commonly referred to as the Phillips curve (Cate 141). This concept suggests that there is a tradeoff between the stability of prices and employment. This model was used to describe the status of the US economy in the 1960s however; it failed to explain the connection between economic stagnation and increasing inflation. It can be stated that the Philips curve explains the demand- pull aspect of the triangle model. The rational expectations theory states that economic actors act rationally to maximize their well being in future. They do not act solely depending on opportunity cots and pressures. This view states that future expectations and strategies play a key role in inflation (Gillman 67). A key assumption in this theory is that economic actors will act to keep up with rising inflation rates. This means that the central bank must play a key role in ensuring that they regulate the insurance rates. The monetarist view is based on the fact that the major factor affecting deflation or inflation is the velocity of money. In other words, inflation is affected by how quick the supply of ...Download file to see next pagesRead More
Comments (0)
Click to create a comment or rate a document
The Great Inflation of the 1970s in the United States
This study looks into the Great Inflation of the 1970s as the period during which the U.S experienced the worst economic downturn in recorded history. Characterized by high inflation and high unemployment, the Great Inflation of the 1970s was caused by poor monetary and fiscal policies by the Federal Reserve Bank, under political pressure from President Richard Nixon.
12 Pages(3000 words)Term Paper
How Does The Rising Rate Of Inflation Bring Down The Prices Of Houses In The United States
When the prices of all the goods and also services increase continuously, this activity is known as inflation. During a period of inflation, money loses its power of purchasing since every unit of currency buys less amount of goods. When it comes to individual goods, such as housing the changes in the prices vary greatly.
5 Pages(1250 words)Essay
Inflation in the United States
The most reliable measure of inflation levels is the overall consumer index (CPI-U). CPI-U measures the average price of a fixed set or basket of goods and services. Various economies of the world have been experiencing an increasing rate of inflation over the past decade.
3 Pages(750 words)Research Paper
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
The Fiscal and Monetary Policy and Economic Fluctuations
The nominal Gross Domestic Product of the United States of America was approximated to be $16.62 trillion in the year 2012. This is almost one quarter of nominal global Gross Domestic Product. In addition, the country’s Gross Domestic Product at purchasing power parity is also the leading among any definite nation in the universe.
3 Pages(750 words)Essay
Economics Coursework - Macroeconomics, Unemployment and Inflation
Zimbabwe is a country located in the borders of South Africa. In this country the economic is facing a disastrous hyperinflation
4 Pages(1000 words)Essay
Effect of inflation on USA
the work will be to see what types of inflation it is possible to see in the USA, to estimate the role of inflation for the economic situation of the USA, to compare the data of inflation of the latest years. Inflation is a process inherent in the economy, in which the scope
13 Pages(3250 words)Essay
This means that the number of goods and services a dollar would buy would reduce over time. That is, the value of the currency would fall. It is also argued that a desired rate of
6 Pages(1500 words)Essay
College should be a equal opportunity for everyone
It is reported that students seek for loans on their own and this has made them to become serious with their studies and loan repayments. It is not acceptable for students to pay extra fees, as they will not have equal playing
2 Pages(500 words)Essay
3 faces of low inflation: U.S., Japan and the Euro Area
s, Japan and the Eurozone.The experience examined by Contessi regarding inflation was accurate because they yearly inflation experienced due to personal consumption expenditure lie, for example in the month of April was found to be 1.98 percent in 2012 before dropping in October
2 Pages(500 words)Essay
Let us find you another Essay on topic Inflation in the United States for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us