Inflation 2
INTRODUCTION: What is inflation? The definition of inflation, according to Webster's Revised Unabridged Dictionary, is "an undue expansion or increase, from overissue." (Hypertext, 1) Although, Webster's is considered by most to be the overall best dictionary, WordNet states the meaning of inflation a lot clearer by saying, "it's a general and progressive increase in prices." (Hypertext, 1) It occurs when the value of goods rises faster than the value of money. The usual approximate measure of this is the Consumer Price Index, which weigh the prices of different goods according to importance in a typical budget and then shows how much the prices of these goods have increased. This immediately raises some problems; for example, the weight of the goods must change over time. The importance of computers was not measured in the price index 100 years ago. Another problem is the failure of the price index to capture changes in quality. The quality of a good may have improved by 20%, while the price has only risen by 10%. The consumer price index doesn't feel this should be a factor, but many would disagree. Hence, inflation is not easy to define in practice. This should be kept in min
The Phillips Curve is thought to be the "proper" way of balancing economic growth and inflation. For this reason the Federal Reserve is always looking for the perfect equilibrium at which we can maximize our economic growth while keeping inflation as minimal as possible. They do this by increasing and decreasing interest rates. Although, Economists and the Federal Reserve abide by the Phillips Curve as a general rule for not letting inflation get out of hand, it has been proven many times in the past that it is possible to have a very healthy and prosperous economy without raising inflation at all. There are even examples of inflation declining while the economy booms. Forbes, Steve. "Bad Idea Begets Bad Economy." Forbes. Oct. 9, 1995: p23. Dentzer, Susan. "Honey, I Shrunk the Price Tag!." U.S. News & World Report. Sept. 23, 1996: p72.
Some common words found in the essay are:
Phillips Curve, Price Index, Federal Reserve, Federal Reserves, Price Indexes, Unabridged Dictionary, Forbes Forbes, Clinton Administrations, Vietnam Wars, Forbes Oct, phillips curve, consumer price, price index, consumer price indexes, inflation rate, consumer price index, raising rates, price indexes, federal reserve, forbes oct, economists believe, typical budget,
Approximate Word count = 1198
Approximate Pages = 5 (250 words per page double spaced)
|
