How The Recession Affects Inflation And Unemployment Essay

How The Recession Affects Inflation And Unemployment Essay

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Recession is defined as when businesses cease to expand, the GDP diminishes for two consecutive quarters, the rate of unemployment rises and housing prices decline. June 2015 marks the six-year anniversary of the conclusion of the great recession of 2008. The great recession affected millions of people worldwide and was related to financial crisis and sub-prime mortgages in the United States. The great recession put the United States economy at a state where has not been since the great depression in the 1930s. There are many factors that contribute an economy 's fall into a recession. I will discuss how the recession affects inflation and unemployment.
Consumer Price Index (CPI) is one of the economic indicators that help measures the current state of the economy. The CPI is calculated on a monthly basis by the labor bureau of statistics. The change in prices for Food energy, and goods and services that are purchased by consumers is represented in the calculation of the CPI. The CPI is an indicator for inflation, which the Federal Reserve utilizes the results for an understanding on how the economy performing. According to the labor bureau of statistics website, the current rate of CPI is 0.4 in the month of May. During the climax of the great recession (October 2009) the CPI was 0.2. Therefore, the prices have risen slowly. If CPI were increase significantly, this would put the economy into hyperinflation, but since the CPI is calculated on a monthly basis, it conveys to the federal bank when to step in to stabilize prices because it could potentially collapse the economy and ruin the government. Therefore, since the CPI hasn’t drastically changed since the great recession, the economy has been slowly growing. If the CPI wer...

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...e bureau Labor of Statistics that shows the unemployment rate for the past 16 years.

In conclusion, inflation and unemployment are two of several indicators that can determine the state of the economy. They are both very relative. During the recession, the United States experienced stagflation in 2008. Stagflation is when the inflation rate is high when there is a recession. During this period of stagflation, the employment rate was slowly on the rise. However, in order to stabilize the economy the government increases spending, and cut taxes. This will cause people to utilize the extra money and put it back in the economy, which ultimately raise the GDP, create more jobs, reduce unemployment rates and inflation rate increases at a slow rate. Therefore, these indicators are great tools for the government and agencies to help prevent the economy from dwindling.

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