How The Recession Affects Inflation And Unemployment Essay

How The Recession Affects Inflation And Unemployment Essay

Length: 875 words (2.5 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

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...


... middle of paper ...


...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.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Unemployment, Inflation, And Unemployment Essay

- Unemployment Real GDP, inflation, and unemployment these are statistics that are measuring macroeconomic health of country. The biggest macroeconomic concept that directly affects all people is unemployment. The family can lose income and reduce standard of living, when a member of family is unemployed. Understanding what unemployment really is and how it works is a critical question for both for the economists and for the consumers. The unemployment is a wasted capacity. This means that the economy is producing fewer goods and services than it could produce....   [tags: Unemployment, Economics, Discouraged worker]

Better Essays
1251 words (3.6 pages)

The Unemployment Rate Among African Americans Essay

- The Problem The unemployment rate among African Americans has been a long-term problem. From 2000 to 2015 the unemployment rate for African Americans was double that of the white unemployment rate (Marans, 2015). More specifically, it impacts black teens as their unemployment rate stayed six times higher than the white unemployment rate (Marans, 2015). This high rate may discourage black teens from looking for work in the future and turn to crime as an alternative to earn money. Per Heather Mac Donald, blacks make up 23% of New York City’s populations, but commit 75% of the shooting and 70% of all robberies (Mac Donald, 2016)....   [tags: Inflation, Unemployment, Monetary policy]

Better Essays
1259 words (3.6 pages)

Factors Affecting the Unemployment Rate Essay

- Unemployment rates refer to the number of people who have been verified as being with no employment and who have actively tried to secure employment within the current past without success. This means that these categories of people are willing and able to work but there are no employment opportunities. The unemployed group of people does not include people who have no jobs and have not been trying to get employed. Thus to be termed as unemployed there must be some demonstration of efforts to gain employment (Trading Economics)....   [tags: Economics, Unemployment Essays]

Better Essays
971 words (2.8 pages)

Breakfast Party Economics By Eveline J. Adomait And Richard G. Maranta Essay

- Over the past two quarters Canada has experienced a continuous decline in GDP. Many factors contribute to the recession and decreases in the financial stability of our country. Factors that either contribute or reveal that Canada is in a poor economic position are increasing unemployment rates, surging price levels, and rising interest rates. These opposing contributions force consumers to save their money instead of putting it back into the economy. This then diminishes the economy, forcing the recession onto our citizens....   [tags: Inflation, Economics, Unemployment]

Better Essays
1216 words (3.5 pages)

Essay about Role of Federal Rate in Economics

- The Federal Funds Rate is the interest rate that Federal Reserve uses to trade funds with banks. Changes in this rate can trigger a chain of events that can be beneficial or devastating to the economy. If a bank is charged a higher interest rate to trade money or take out a loan, then the increase will be passed on to their customers, causing them to pay higher transaction fees or more interest. Each month, the Federal Open Market Committee meets to determine the federal funds rate. This in turn affects other short term interest rates....   [tags: Recession, Money Flow, Inflation]

Better Essays
998 words (2.9 pages)

The Global Financial Crisis Of The United States Essay

- The 2007 global financial crisis had huge impact of different countries economic fortunes, leading to “Great Recession.” The recession began as an isolated turbulence in the sub-prime sector of the United States housing market and later transformed itself into a fully blown recession by the end of 2007. The old proverbial saying that “the rest of the world sneezes when the United States catches a cold” was proved when the major global economies including Japan and European Union collectively went into recession by mid-2008 (Acharya and Richardson, 2010)....   [tags: Unemployment, Recession, Tax, Great Depression]

Better Essays
1718 words (4.9 pages)

Inflation And Unemployment From A Big Recession Essays

- Inflation and unemployment go hand to hand in the world’s economy. When the unemployment rate starts going up inflation goes down and vice versa. Unemployed people are people that are looking for a job but can’t find one. Inflation in the other hand is the rise of prices of products and services. Inflation causes workers to ask for higher wages to be able to afford their expenses. In some cases, when the economy is in a recession employers can’t afford increasing wages or paying workers, so they decide to lay them off....   [tags: Unemployment, Recession, Macroeconomics]

Better Essays
995 words (2.8 pages)

Inflation Targeting Monetary Policy in the UK in 1992-1997: Was It Successful?

- Increase in international economic integration necessitates countries to determine an appropriate monetary policy. It means the control of the money supply or interest rate by the monetary authority (Lipsey and Crystal, 2007). The main purpose of it is to provide the economic stability and growth. The mechanism that provides these changes in the monetary policy is called the monetary transmission mechanism (MTM). Therefore, the aim of this essay is to discuss and analyze the role of the MTM in solving macroeconomic problems....   [tags: Economics ]

Better Essays
1282 words (3.7 pages)

Federal Open Market Committee ( Fomc ) Essay example

- When congress passes a law it must be executed by the President or if the President proposes a law it must be passed by congress. However, the Fed has total control on making and carrying out monetary policies. Also, deliberations regarding fiscal policies can go on for months or even years, but the federal open market committee (FOMC) can set monetary policies in one day and have it implemented within hours. The Fed’s impact on monetary policies can be very dramatic. It can push interest rates up or down....   [tags: Inflation, Monetary policy, Unemployment]

Better Essays
1110 words (3.2 pages)

Essay on To What Extent is Inflation a serious Economic Problem

- To What Extent is Inflation a serious Economic Problem ====================================================== Before considering whether Inflation has serious Economic Problems, we have to get to grasp what it exactly is. Inflation is defined as a sustained general rise in prices in the Economy. Obviously the government can't measure every single price change for every single good in the economy, so therefore they take a basket of goods and by using a price index measure a change in it. The basket of good has a representative range of goods and services and it needs to be recorded at a regular basis, to measure how inflation is changing....   [tags: Economics]

Better Essays
1667 words (4.8 pages)