Inflation and the economy essay

Markets Economists study trade, production and consumption decisions, such as those that occur in a traditional marketplace. Electronic trading brings together buyers and sellers through an electronic trading platform and network to create virtual market places.

Inflation and the economy essay

By Sean Ross Updated January 15, — Many economists, businessmen, and politicians maintain that moderate inflation levels are needed to drive consumption--operating under the larger, overarching assumption that higher levels of spending are crucial for economic growth. The Federal Reserve typically targets an annual rate of inflation for the United States, believing that a slowly increasing price level keeps businesses profitable and prevents consumers from waiting for lower prices before making purchases.

Others, however, argue that inflation is less important and even a net drag on the economy. Rising prices make savings harder, driving individuals to engage in riskier investment strategies to increase or even maintain their wealth. Some claim that inflation benefits some businesses or individuals at the expense of most others.

Defining "Inflation" You may hear the term "inflation" used to describe the impact of rising oil or food prices on the economy.

This may cause many other prices to rise in response. However, most economists describe a subtly different effect when they talk about inflation.

Inflation is also a function of the supply and demand for money, meaning that producing relatively more dollars causes each dollar to become less valuable, making the general price level rise.

More dollars translates to more spending, which equates to more aggregated demand. More demand, in turn, triggers more production to meet that demand. Famous British economist John Maynard Keynes believed that some inflation was necessary to prevent the "Paradox of Thrift.

The net effect of this paradox is to reduce aggregate demandleading to less production, layoffs and a faltering economy. Inflation also makes it easier on debtors, who repay their loans with money that is less valuable than the money they borrowed.

This encourages borrowing and lending, which again increases spending on all levels. Perhaps most important to the Federal Reserve is that the U. Economists once believed in a real inverse relationship between inflation and unemployment, and that rising unemployment could be fought with increased inflation.The next president will have to deal with yet another crippling legacy of George W.

Bush: the economy. A Nobel laureate, Joseph E. Stiglitz, sees a generation-long struggle to recoup. IN WATCHING the flow of events over the past decade or so, it is hard to avoid the feeling that something very fundamental has happened in world history.

Essay on the Types of Inflation: As the nature of inflation is not uniform in an economy for all the time, it is wise to distinguish between different types of inflation.

Such analysis is useful to study the distributional and other effects of inflation as well as to recommend anti-inflationary policies. Inflation On The Economy: Inflation Words | 7 Pages Inflation in Iraq As reported by D.

Accustomed Naji al-Hamdani , in a study on Inflation in the Iraqi economy, inflation arises in most cases because of the imbalance and lack of balance between aggregate demand and aggregate supply in .

Tariffs revision designed to cure trade deficits have become a live and contentious economic policy issue. Despite the ripples it creates, confronting the trade deficit is long overdue given its importance to such things as reducing the economy’s growth rate, and all that follows in terms of jobs, wages and income.

Sep 03,  · 8. Essay on Inflation Inflation and Inflation United Kingdom. Inflation United Kingdom Inflation Rate The inflation rate in the United Kingdom was recorded at percent in December of Inflation Rate in the United Kingdom is reported by the UK Office for National Statistics.

Inflation and the economy essay
Economic essays on inflation | Economics Help