One thing we learned about in microeconomics is inflation, specifically causes for inflation. The main cause of inflation is the mismanagement of the money supply. This can be accidental or intentional, but either way causes inflation. It can be very simply fixed by making good decisions financially and managing the money supply better. This can be done by the central bank influencing interest rates, printing money, setting reserve requirements, buying and selling bonds, and open market operations. Another cause for inflation is the demand pull, which is when the demand outweighs the supply, causing an increase in demand, meaning higher prices. An example is when World War 2 ended, and all the troops came home to get married, have kids, spend a lot of money, and get jobs. The demand for a lot of things went up, thus so did the price. The last thing that causes inflation is cost push, which happens when the cost of wages and raw materials go up, thus raising prices. This happens a lot with oil, transportation, and labor.
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Hello Natalee,
I found your post very interesting. “As Jimmy Carter found out, inflation, whether temporary or structural, is bad politics, espeiall when political margins are close.” (Galston, and Kamarck, 2022). I understand that politicans have some interest in keeping inflation moving. Whereas there is a counter to that as well specifically as far as politicians staying in power. This is mostly due to most individuals believing that inflation is major concern, especially in American politics.
References
Galston, W. A., & Kamarck, E. (2022, March 09). Inflation politics is clearer than inflation economics. Retrieved from https://www.brookings.edu/blog/fixgov/2022/01/14/inflation-politics-is-clearer-than-inflation-economics/
Great job on this post. Currently, economists have tracked the current inflation rate at around 6%, the highest it has been ever since November of 1990 (TradingEconomics, 2021), and its effects have been felt particularly in the ever-increasing of gas prices. As I was reading your post, I was thinking about the recent raises in minimum wage in some states like California's raise to $13-$14/hour (Soergel and Clarke, 2021). Supporters state that raising minimum wage helps with improving their overall standard of living and foresee that it will bring many workers and their families out of poverty (Maverick, 2021). However, critics have cited that raising minimum wage can contribute to inflation by businesses increasing their prices in order to cover their increased labor costs (Maverick, 2021). Inflation also contributes to an increased cost of living, thereby negating all of the gains that were given by an increased wage.
References
Maverick, J. B. (2021, May 19). What are the pros and cons of raising the minimum wage? Investopedia. Retrieved December 14, 2021, from https://www.investopedia.com/articles/markets-economy/090516/what-are-pros-and-cons-raising-minimum-wage.asp
Soergel, A., & Clarke, S. (2021, August 2). A guide to minimum wage by State | Best States | US news. U.S. News & World Report. Retrieved December 14, 2021, from https://www.usnews.com/news/articles/best-states/minimum-wage-by-state
TradingEconomics. (2021). United States inflation RATE2021 DATA: 2022 forecast: 1914-2020 historical. United States Inflation Rate | 2021 Data | 2022 Forecast | 1914-2020 Historical. Retrieved December 14, 2021, from https://tradingeconomics.com/united-states/inflation-cpi
I was reading a post about inflation and saw an interesting theory. It said that, despite all the posturing, government officials actually want inflation to continue. “Politicians have a vested interest in keeping inflation going” (Alvaro, 2021). With almost thirty trillion in debt, apparently our government simply cannot afford to allow let interest rates rise, and taxes and prices to decrease. With all the debt swept under the rug, and money magically appearing in their pocket, the government is seemingly a ticking time bomb.
References
Alvaro Vargas Llosa, opinion contributor. (2021, November 20). The roots of inflation go far beyond the supply chain. TheHill. Retrieved December 5, 2021, from https://thehill.com/opinion/finance/582395-the-roots-of-inflation-go-far-beyond-the-supply-chain.