One of the most critical aspects of the macro economy is the role inflation plays in determining price levels. Undoubtedly higher inflation will have a negative impact on the economy driving price levels higher then consumer wages are able to keep up with. However, if inflation is too low (below 2%, above 0) it will impede economic growth. The current inflation rate of .2% is a reflection of the anemic economic growth in the economy (U.S. Inflation Calculator). Inflation rates also have a direct impact on the level of investment in the economy. If the price of goods increases and people have to compensate for the increase in price, they usually make use of their savings. In the event when savings are depleted, fund for investment …show more content…
In 1980 the purchasing power of 1 U.S. dollar is the equivalent to 2.89 dollars today (Bureau of labor statistics 1). This is a disturbing number because with the purchasing power of the dollar being relatively low coupled with low inflation rates signifies a weakening dollar. Additionally the CPI is the major indicator the U.S. government uses in determining inflation rates. The federal government also uses the CPI to determine how much more money entitlement programs will receive in order to keep up with minimum standard of living set forth by said programs, social security being an example. It is also important to recognize that the Consumer Price Index (CPI) is a weighted average of the change in prices of goods and services across the economy. It is as unrealistic to expect the prices of all goods and services exactly to conform to the average. Correspondingly price increases for health care have consistently outpaced the “average” rate of inflation across the economy for a variety of reasons, among which is the inherent labor intensiveness of the health care sector. It is unrealistic to tie limits on health care spending, which must reflect inflation in the health care sector, to a measure of inflation that is less than the real rate of …show more content…
Both the unemployment rate (5.0 percent) and the number of unemployed persons (7.9 million) were essentially unchanged in October. Over the past 12 months, the unemployment rate and the number of unemployed persons were down by 0.7 percentage point and 1.1 million, respectively according to the BLS (BLS 2). While this may seem to be a promising sign that the economy is operating at theoretical full employment this is simply just not the case. The labor force participation rate which measures the share of Americans at least 16 years old who are either employed or actively looking for work – dipped last month to a 38-year low, clocking in at an underwhelming 62.6 percent (U.S. News). This drop in unemployment coupled with an extremely low labor force participation rate means that the unemployment numbers put out by the BLS are not telling the full story. The BLS fails to account for part time workers, under employed individuals, and discouraged workers. The U-6 unemployment rate which takes into account portrays a different picture. For October 2015 the official U-6 unemployment rate fell from 9.6% in September to 9.5% in October. While the independently produced Gallup equivalent called the “Underemployment Rate” fell from 14.1% in September to 13.8% in October. The current differential between Gallup and BLS on supposedly the