inflation

Examples of inflation in the following topics:

• Growth Economics

  • If GDP (after adjusting for inflation) goes up, the economy is growing; if it goes down, the economy is contracting.
  • Growth is usually calculated in real terms, i.e. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced.
  • To express real growth rather than changes in prices for the same goods, statistics on economic growth are often adjusted for inflation or deflation.
  • The table might mention that the figures are "inflation-adjusted," or real.
  • If no adjustment was made for inflation, the table might make no mention of inflation-adjustment, or might mention that the prices are nominal.

• Growth Through Monetary Policy

  • When the Fed believes that inflation is a problem, it will use contractionary policy to decrease the money supply and raise interest rates.
  • Because money is "tighter"more expensive to borrow–demand for goods and services will go down, and so will inflation.
  • Monetary policy uses a variety of tools to control one or both of these in order to influence economic growth, inflation, exchange rates, and unemployment.
  • Furthermore, monetary policies are described as follows: accommodative, if the interest rate set by the central monetary authority is intended to create economic growth; neutral, if it is intended neither to create growth nor combat inflation; or tight, if intended to reduce inflation.

• Stability Through Fiscal Policy

  • In theory, fiscal stimulus does not cause inflation when it uses resources that would have otherwise been idle.
  • For instance, if a fiscal stimulus employs a worker who otherwise would have been unemployed, there is no inflationary effect; however, if the stimulus employs a worker who otherwise would have had a job, the stimulus is increasing labor demand, while labor supply remains fixed, leading to wage inflation and, therefore, price inflation.

• Fair Labor Standards Act

  • The full effect of the FLSA of 1938 was postponed by the wartime inflation of the 1940s, which lowered wage values to below the level specified in the act.
  • Subsequent amendments have continued to raise the minimum wage level according to inflation.

• The rules of cooperative business networking

  • Never inflate your business's abilities and never steal ideas or clients from cooperative partners.

• Employment Levels

  • Unemployment above 0% is advocated as necessary to control inflation, which has brought about the concept of the Non-Accelerating Inflation Rate of Unemployment (NAIRU).
  • Instead, there is a trade-off between unemployment and inflation: a government might choose to attain a lower unemployment rate but would pay for it with higher inflation rates.
  • Ideas associated with the Phillips curve questioned the possibility and value of full employment in a society: this theory suggests that full employment—especially as defined normatively—will be associated with positive inflation .

• Measuring the Money Supply

  • Public and private sector analysts have long monitored changes in money supply because of its possible effects on the price level, inflation and the business cycle.
  • M2 is a key economic indicator used to forecast inflation.
  • Money supply is important because it is linked to inflation by the equation of exchange in an equation, MV=PQ, proposed by Irving Fisher in 1911:

• The State of Global Business

  • These make inflation rates in developing countries stay at high levels.

• The Lender of Last Resort

  • The Federal Reserve System's role as lender of last resort has been criticized because it shifts the risk and responsibility away from lenders and borrowers and places it on others in the form of inflation.

• Introduction to the Federal Reserve

  • Since the inflation of the 1970s, Federal Reserve monetary policy has emphasized preventing rapid escalation of general price levels.