Why is inflation bad for the American economy? Imagine going into the popular local food market or gas station several times a week. After a couple of weeks, imagine going into these stores and noticing the prices have steadily increased over the past few months. This is called inflation, and it is causing many problems in the United States. There are three different types of inflation: demand-pull, cost-push, and built-in. Demand-pull inflation occurs when prices increased because of such high demand. Cost-push inflation is when prices surge resulting from high input costs. Built-in inflation is when prices continue to rise after any natural causes. The inflation occurring in America is a demand-pull. Inflation has affected the United States in terms of rising commodity prices on food and petroleum, and putting millions of people out of jobs.
Commodity prices are prices on any marketable items produced to satisfy needs or wants. Inflation has impacted commodity prices this year more than ever. Prices of most key items continue to rise drastically. “The previous high record of 55 food commodities was 213.5 points in June 2008. Those points have shot up to 214.7 since the start of this year. Sugar products reached 30-year high, coffee products reached a 13-year high, corn products reached a 29-month high, and oil reached a 33- month high” (“Food Prices Reach Record High” 1). These milestones show just a portion of how dramatic these new prices are. The reason these prices have shot up is because the demand for food products is growing daily. America is getting bigger and bigger each day. As the demand continues to rise, so are the prices.
The National Inflation Association predicts food inflation will be the biggest issue of 20...
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I am a husband and a father of four lovely children. We need a large vehicle to haul all of us around town. And of course I would do anything to keep them safe and I always want to provide them with the best. Therefore, after the birth of our fourth child two and a half years ago, my wife and I decided to upgrade our Ford Explorer to a Ford Expedition. We got everything from the side-curtain airbags to the TV and DVD player. What we did not know was we also purchased a rather large unleaded gas bill. The first time we filled the tank it cost us roughly $35; today it costs us right around $75 to fill the tank. Obviously the price of gas has increased significantly in the last two years. The price increase is due to a fluctuation in the supply and demand of not only gasoline but also crude oil, which is needed to manufacture gasoline. In addition, several other factors are influencing a change in the price of gasoline.
Empirical literature examining the determinants of inflation has mostly viewed it as a monetary phenomenon. This viewpoint basically stems from Milton Friedman’s famous dictum that inflation is always and everywhere a monetary phenomenon. However, the conjecture of Friedman has recently come under attack. In fact, there appears to be virtually no correlation between money growth and inflation since the early 1980s. This leads to evolution of the argument known as Fiscal Theory of Price Level (FTPL). To capture the nonmonetary aspects of inflation, a number of economists investigate the main political, institutional and economic determinants of inflation across countries and over time. For instance, Aisen and Veiga (2006) conclude that political instability leads to higher inflation. Their study reveals that an additional government crises and a cabinet change which are used as proxy for measuring political instability raise inflation rate by 16.1% and 9.1% respectively. In another study, Aisen and Veiga (2008) extend their work to further analyze the effect of political instability, social polarization and the quality of institutions on inflation volatility. They argue that politically unstable and socially polarized countries with weak institutions are more exposed to political shocks that result in discontinuous monetary and fiscal policies which in turn result in higher inflation volatility. The intuition is that rising inflation instability creates frictions on market which reduces economic efficiency and causes the prevailing price in the economy to deviate from the price which would otherwise have been determined in presence of stable price level. They also provide evidence that greater independence of the Central Bank leads...
Inflation refers to the annual increase in the prices of goods and services in a nation. An increase in inflation causes a unit of money to buy less stuff while a reduction
As years pass and demand for gasoline increases, it is inevitable that the world’s oil supply will not last forever. This idea is made increasingly clear by evidence of peaking. Peak production is the point in time when about one-half of the world’s oil supply will be gone. Oil production in a given ...
using a price index measure a change in it. The basket of good has a
West, Jim. ?Different Views of Gasoline Taxes.? The Oil and Gas Journal August 14, 1995: 9.
The American economy has suffered many financial blows in the recent years, but none have such a drastic and heavy effect on the average American than the rising gas prices. A solution to the Gas Crisis, a new and formidable crisis involving the high cost for gasoline powered transportation, must have widespread results across American commuters to either increase the efficiency of drivers, drastically lower gas prices, or provide alternate modes of transportation, consequently allowing for American commuters to be able to efficiently transport themselves at a moderate price.
Escalating prices for food are driving up the cost of groceries in the U.S., effecting consumers and companies. “Federal forecasters estimate retail food prices will rise as much as 3.5% this year, the biggest annual increase in three years, as drought in parts of the U.S. and other producing regions drives up prices for many agricultural goods” (Dreibus). For instance, “Drought in Brazil, the world's largest producer [in] coffee, sugar and oranges, has increased coffee prices, while dry weather in Southeast Asia has boosted prices for cooking oils such as palm oil” (Dreibus). Also, “In the U.S., much of the rise in the food cost comes from higher meat and dairy prices, due in part to tight cattle supplies after years of drought in states such as Texas and California and rising milk demand from fast-growing Asian countries” (Dreibus). Consumers and producers will take action to cope with these surging food prices under several economic principles.
In 2007 the worst food crisis since 1974 broke out. The number of hungry people continued to rise to 1.09 billion in 2009. Most experts traced the start of the crisis to the rising of food prices. There are several causes to the rising of food prices. The increasing demand from the middle class in developing countries is one reason. One of the first causes to explain the food price increase was the growing demand for meat in China a...
Since the birth of the United States over two-hundred forty years ago, the citizens of this country and of all civilization throughout the world, have seen this country grow to extraordinary heights in terms of production, the armed forces, population, and also, the economy. Likewise, the world has also seen the United States economy drop tremendously during times such as the Great Depression of the 1930s, and most recently during the housing market crash of 2007. The changes in politics that occur on a yearly basis have both created a positive and negative outlook of today’s economy. The most recent and important political change that will decide the growth or decline of the economy for years to come was the inauguration of the 45th President,
Inflation is one of the main reasons for the minimum wage being at a low level. In the United States workers are earning less than they did in the seventies. Last year in the United States approximately three million people of the working class dropped below the national poverty level. Minimum wage laws are established by the federal and state governments to help balance out the amounts of money people earn. It prevents one person or persons from making all the money, and some making very little. The term income distribution is where everyone would earn the same amount of money. This is not something that could really happen because everyone has different levels of education and different trades. Minimum wage is a way to try to keep the income distribution fairly equal. The views on raising the minimum wage are very different from person to person.
Inflation refers to persistent increase in the price level over time and is one of the most dangerous threats to an economy because if unchecked it will erode the purchasing power of a currency and if the monetary system of the country is destroyed, can ultimateky force the indivduals to adopt foreign currency.
Food prices have been on the rise and have become a global issue. Prices have soared over the past year and a half and threaten to go up further if issues are not addressed immediately. Below is a look at how prices have been over the past year.
As an aftereffect of inflation, the purchasing power of a unit of money falls. For instance, a pack of gum that costs $1 and if inflation rate is 2% then in a given year will cost $1.02 the following year. As products and services require more cash to buy, the implicit value of that currency falls.