Inflation In The Macro Economy

Great Essays
• Inflation
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

Related Documents

  • Superior Essays

    The Medicare-For-All policy is one of the many bills Bernie Sanders is trying to pass, if elected as President. The Affordable Care Act is a little similar, and has gotten our country so much closer to gaining the Medicare-For-All policy. More than seventeen million Americans have gained health insurance from the Affordable Care Act. Millions of low-income Americans have coverage now, thanks to expanded eligibility in Medicaid, that exists in thirty-one states. Kids can now stay on their parents’ health plans until they’re twenty-six.…

    • 1505 Words
    • 6 Pages
    Superior Essays
  • Improved Essays

    Mr. Epstein, in his article entitled, “Inside the Jobless Numbers,” makes three key points, 1) the unemployment rate has never been the object of as much attention from the markets and the media as it is now 2) despite the heightened focus, there are a lot of misunderstanding and misconceptions about how the rate is calculated 3) a close look at the Bureau of Labor statistics methods, suggests they may be over counting the unemployed instead of under counting (Epstein, 2015). In today’s media, where news is almost reported simultaneously as it happens, and along with social media, we are bombarded at all times with information. How accurate and true is this information? We will see in this essay that not only can the reporting be flawed, but that the system used by the actual Bureau of Labor is quite flawed from the beginning.…

    • 576 Words
    • 3 Pages
    Improved Essays
  • Decent Essays

    Unemployment is one of the most important topic in the economic world not only in the U.S. but also in the world. It is so important that depending on how unemployment goes it depends on how people live and how a country functions. Unemployment in the U.S. has been a problem ever since the 1930’s when it first flared up at its highest unemployment 13 to 15 million people were without a job. This was all as a result of the great depression, what many believe was one of the worst and longest economic crisis in the United States. Before the great depression the unemployment rate was around 5%.…

    • 295 Words
    • 2 Pages
    Decent Essays
  • Great Essays

    Sonia Bhardwaj Economics_01_002 Prof. Jonas Shaende 04/26/2017 Problem Set #3: - Question 1: o Which of the following transactions will be included in GDP for the United States?  Coca-Cola builds a new bottling plant in the United States.…

    • 1062 Words
    • 5 Pages
    Great Essays
  • Improved Essays

    Current Events “Unemployment” In a recent article posted by USA Today author, Paul Davidson, he states that the applications for unemployment aid have reached its lowest in a staggering 42 years. This shows that the job market is becoming stronger and unemployment rates are now comparable to 1973, when President Nixon was in control in the White House. The economic theory being tested is that if the American job market is as strong as before. This is proven to be true since the unemployment rate has dropped back to America before the massive economic crisis occurred.…

    • 174 Words
    • 1 Pages
    Improved Essays
  • Superior Essays

    1) The individual mandate is originally a Conservative idea. The individual mandate, seemingly the biggest sticking point for conservatives, was the brainchild of Stuart Butler of the conservative Heritage Foundation in 1989. The idea was that an individual mandate would force everyone to take “personal responsibility” where healthcare was concerned. Nobody would get a “free ride” by simply going to the emergency room with no insurance and then skipping out on the bill leaving the insured to pick up the tab through rate increases. 2) Healthcare costs are rapidly spiraling out of control.…

    • 1201 Words
    • 5 Pages
    Superior Essays
  • Superior Essays

    Inflation In America

    • 1526 Words
    • 7 Pages

    Labor day 1971 Richard Nixon made big promises to Americans, he said in his speech “ I call upon all Americans to dedicate ourselves to a goal we have rarely been able to achieve in the past 40 years- a new prosperity without war and without inflation,” (Address to the Nation on Labor day, 1971). Forty six years later and we have strayed further from that path in America. This is because he took us off the gold standard. The gold standard is a system in which money is backed with gold. Taking the United states off the gold standard caused inflation rates to rise.…

    • 1526 Words
    • 7 Pages
    Superior Essays
  • Improved Essays

    Heather Long(2016) wrote a magazine article”Why doesn't 4.9% unemployment feel great? “ published by CNN, which discussed the current unemployment rate, and if we should feel great about it or not. It also discussed how they calculate the unemployment rate, and what do they include or exclude in it. On the other side Stephen T. Evans wrote a scholarly article “An evaluation of the unemployment rates of the United States” published by Southern Utah University, also discussed the unemployment rate, but it criticized the government and how it should do something to help the middle class or otherwise they will be in a bad situation. Because Long’s article was more on point,included great support of his claims, entertaining, and…

    • 2241 Words
    • 9 Pages
    Improved Essays
  • Improved Essays

    Cost Of Healthcare

    • 699 Words
    • 3 Pages

    The cost of health care in the U.S is considered the highest in the world today. While excellent medical care is available in the United States, health care economics and the service delivery system present many challenges for the consumer and practitioner similarly. Throughout the world, the United States has many people swimming in debt because of the cost of healthcare. Healthcare spending has increased by 933.5 billion between 1995 and 2014.Concerns over health care cost are an issue that is rising over U. S. citizens every day. “Their concerns, wide and varied, include: being wipe out financially by a catastrophic illness, losing employer-provided coverage due to a job loss, keeping up with escalating co-pays and deductibles, and paying…

    • 699 Words
    • 3 Pages
    Improved Essays
  • Improved Essays

    The Department of Labor website is a wealth of knowledge about US employment. After reviewing the weekly unemployment claims report I was impressed that overall job loss during the week of 2/11/17 (determined by the number of initial claims) was 4.8% lower than the same week last year and the number of active beneficiaries dropped substantially as well by 7.1% during the preceding year (1/28/2017 – 1/28/2016) (US DOL, n.d.). Most of the unemployed are 16-24 years-of-age, with a higher percentage being males (US DOL, n.d.). In July 2016, there were 20.5 million employed 16 - 24-year-olds and 2.6 million unemployed which remains consistent with last year’s numbers, thus it appears those 25 and older must be finding jobs (US DOL, n.d.).…

    • 901 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    The inflation rate is defined by the financial dictionary as, “A measure of how fast a currency loses its value. That is, the inflation rate measures how fast prices for goods and services rise over time, or how much less one unit of currency buys now compared to one unit of currency at a given time in the past” (Inflation Rate). Many of the concerns are considering that raising the minimum wage would increase inflation rates. “The main causes of inflation are either excess aggregate demand (economic growth too fast) or cost push factors (supply-side factors)” (Causes of Inflation).…

    • 1495 Words
    • 6 Pages
    Improved Essays
  • Improved Essays

    Labor Statistics reported the jobless rate has spiked up this year, and the number of unemployed workers not employed indicates America’s trend to be back on the road of recovery has faltered. The unemployment rate has soared back up to 19%, which means 10.4 million workers are looking for suitable jobs. Last year in 1937, only 14% of American workers, 7.7 million, were looking for work throughout this country. This is the first time unemployment has increased since the depression hit America in 1929. Since then, the jobless rate steadily elevated and peaked in 1933 where 24.75% or 12.8 million workers were not included in the labor market.…

    • 416 Words
    • 2 Pages
    Improved Essays
  • Improved Essays

    Hawaii Economy Essay

    • 838 Words
    • 4 Pages

    The frequent fluctuations between 3.4% and 3.5% argue more that there is little to no significant change in unemployment. the unemployment rate is very low compared to other states. Most states unemployment ranges from 4.0% to 6.8%, although a few, like Hawaii, do remain below 4.0%. I believe Hawaii has a lower unemployment rate because of the isolation of the state. The flow of the work force is not disrupted by major industry booms or downfalls because the industries do not fluctuate as much, and people are not likely to travel to the state if there were a…

    • 838 Words
    • 4 Pages
    Improved Essays
  • Superior Essays

    Erin Heidenreich Dr. McNeal Introduction to American Politics Paper 27 April 2017 Making a Change to the United States’ Health Care The United States of America is supposedly known to give its citizens the best chance at a decent life, yet something as crucial as health care causes financial hardship on many. In fact “56 percent of Americans say they have tried to find out how much they would have to pay out of pocket—not including a copay—or how much their insurer would have to pay a doctor or hospital, before getting care” ("How Much Will It Cost?"). This is distributing that Americans are more worried about the cost of their medical bills than their own health. The system needs to change in order to benefit American citizens.…

    • 1707 Words
    • 7 Pages
    Superior Essays
  • Great Essays

    Wething states, “First, it disproportionately affects young people’s job opportunities” (Wething). The low labor market is defined as “the available supply of labor considered with reference to the demand for it” (Dictionary.com). This means that with fewer jobs available, it is harder for people to get jobs, especially for people new to their field of work. It affects young people in a way where it is uneven employment among young and elder people. In 2007 before the Great Recession, when we had a considerably strong labor market the unemployment rate for young people was 10.5 percent while people through the ages of twenty-five through fifty-four had a rate of 3.7 percent.…

    • 1195 Words
    • 5 Pages
    Great Essays

Related Topics