According to the article, What Is The Current US Inflation Rate?, found in “The Balance” newsletter, inflation in August of 2021 was compared to August of 2020 and statistics show that it has increased by 5.3%. The reason for this increase was because the increase in gasoline prices, new car purchase prices, and utility gas services prices. Prices are dramatically increasing and it is important to revisit and recognize what the inflation target has been and where the United States is, in relation to that. Excluding the impact of food prices and oil, the core inflation rate went up 4.0% over the last year. It is important to notice that these percentages are 2% higher than what is needed for the economy’s stability, according to the Federal Reserve. However, this 2% difference is in agreement with the monetary policy target of reaching overtime in inflation by 2%. So how does this inflation rate affect the people? At the rate of this inflation, businesses and investors are starting to get concerned. Everyone is paying more for purchased items and creates worry in consumers in regards to how much they can afford and pay. The Federal Reserve on the other hand strongly believes and is certain that the current high inflation is momentary and will become more manageable soon. Policymakers should of course take measures to control the high inflation and bring it to more manageable levels. Some actions they can take are what we know as monetary measures and fiscal measures. As far as monetary measures, some methods that can take place are credit control, demonetization of currency, and or issue of new currency. As far as fiscal measures, methods that would fall under it are reduction in unnecessary expenditures, increase in savings, or surplus budgets. Furthermore, other measures that do not necessarily fall under these two categories are to increase production, have a rational wage policy, or having rationing and price control. In summary, the main way to fight inflation in the US is through a contradictory monetary policy. Such policies serve as microeconomic tools that fight distortions in the economy. By doing so, the rates of monetary expansion are reduced by imposed limits on the flow of money in the US. Although this is a measure that policymakers could take, they are also thinking about the challenges this action can bring. A decrease in the money supply means a decrease in Gross Domestic Products and furthermore leads to a decrease in consumer spending. It also brings a rise in unemployment as it causes lower production. Either way, the United States will always have advantages and disadvantages when it comes to economic growth and stability measures, but it is about weighing the odds and going with the strategy that will serve the country the best.
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Genesis, although the topic of national inflation is a common one, especially when it comes to politics, it's refreshing to see it presented in a fairly neutral light that's not seeking to force a certain ideology or blame a certain action or reaction for the nation's current position in regards to inflation. Besides this, I appreciate the systematic listing of the various ways the government could handle the inflation issue, as it gives a good foundational point from where other conversations and ideas could begin. With that in mind, it would be nice to know which of the courses of action listed you think is most likely to be the most effective. Also, I have heard that inflation is a fairly natural thing for many economies, so at what point is inflation a true issue that must be addressed? Is it the same for any country? And if not, then what determines that "crisis" inflation point if you will? Thank you for your post!