Inflation

Inflation

Written by: Wade Dowdy

Written for: Ruth Schaa

Macroeconomics

Monday/Wednesday 11:00 A.M.

February 26, 2014

                Inflation

        Inflation has had a definite effect on the global economy.  Inflation affects everything from employment and the price of anything that you purchase.

        Since the recession ended in 2009, Americans still struggle with high unemployment, low wages, and a slow economy.  One thing that the American people have had in their favor is low inflation.  According to the Federal Reserve’s preferred gauge the overall U.S. inflation inched up to 1.1 percent, which is below the Fed’s target of 2 percent.  In addition, low inflation raises the prospects of something worse.  That is deflation.  Deflation is a broad decline in the price of products, wages, and the value of stocks, homes, and other assets (Rugaber, 2014).

        Low inflation can be good when consumer’s pay increases because it makes their dollar stretch further.  For example, cellphone service has gotten cheaper; the price of breakfast cereal has dropped the last two years, as well as the price of living room and bedroom furniture.  T.V. prices have plummeted 29 percent since 2012.  This is a runaway from the 1980’s inflation rate of 13.5 (Rugaber, 2014).

        Low prices can also pose a threat to the big retail chains such as Walmart, Best Buy, and Bed Bath & Beyond.  Those retailers fought a very brutal price war during the past holiday shopping season. It did get the American people to spend more but according to the Retail Metrics LLC, 33 retailers  were  forced into cutting their profit estimates for the final months of 2013.  Some economists believe that if retailers could raise their prices about 3 or 4 percent it would lead to higher revenue that would allow them to pay their employees more money (Rugaber, 2014)

        The impact of inflation has greatly affected my family in various ways.  For example, fuel prices are on the rise along with the rising cost of energy. College tuition, food prices along with healthcare cost.  Instead of our income going up it is steadily declining leaving us with less resources to live on.  This is how inflation it has affected my family.

REFERENCES

Rugaber, Christopher (2014, February).  The Downside Of Low Inflation. A Weaker Global Economy.  February 26, 2014 http:// http://abcnews.go.com/Business/ wire Story/downside-low-inflation-weaker-global-economy