Or in other words Inflation occurs when the supply of money far exceeds the supply of goods and services. The functions of money are to serve as a medium of exchange, a unit of account, and a store of value. Inflation mainly affects the ability of money to serve as a store of value, since inflation erodes money's purchasing power, making it less attractive as a store of value. Money also isn't as useful as a unit of account when there's inflation, because stores have to change prices more
The shortage of funds will cause the interest rate to increase, resulting in two reactions: 1. More savers will enter the market to supply loanable funds because the reward (interest rate) is now higher. 2. Some potential borrowers will decide not to demand loanable funds at the higher interest rate. Factors That Affect Interest Rates: 1.
Consumer price and producer price in 2009 to 2012 continue to drop and raise the price for consumers was not steady. The direction and magnitude of price change in the Producer Price Index for finished goods anticipates a similar change in the Consumer Price Index for all items. When this assumed relationship is contradicted by the actual movements of the two series. The answer is that conceptual and definitional differences between the PPI and CPI—differences which are consistent with the uses of the two measures—contribute to the differences in their price movements. A primary use of the PPI is to deflate revenue streams in order to measure real growth in output.
The diagram above shows that real GDP has increased from Y1 to Y2 which means that economic growth has increased. As a result, unemployment falls as we are getting closer to the inelastic part of the AS curve, which is much needed as “unemployment has shot up” in this economic crisis. However, inflation has risen from P1 to P2 which means that our exports become less competitive so our trade deficit gets worse. However, the rise in inflation is needed as inflation is falling below the 2% target. The changes in the government’s macroeconomic objectives depends on where we are on the AS curve as shown below.
If the interest rate is low, it will cause more funds to be available, greater expansion and increased employment. If the interest rate is high, it will cause fewer funds to be available, less expansion, and decreased employment. Fiscal policy is an important tool for managing the economy because of its ability to affect the total amount of output produced or the gross domestic product. The first impact of a fiscal expansion is to raise the demand for goods and services. This greater demand leads to increases in both output and prices.
Decreasing the interest rate effectively increases consumer and businesses consumption. Lower interest rates also increase investments and net exports (Hubbard, 868). These increases push true GDP back in line with potential GDP and, as a result, production increases. This increase in production also increases the need for workers, ultimately increasing employment. Conclusion The Federal Reserve is a very powerful entity and has a large amount of influence on how our nation’s economy performs.
Conversely, the United States’ output and employment would suffer and lead to larger increases in interest rates over the long term (Page & Reichling, 2012). Higher interest rates would prove extremely detrimental to the economy. Not only would it stifle growth in general, but it would also increase the amount of money the government would have to spend to service its debt. This would hamper government spending that produces a benefit to the economy. Sequestration offers limited austerity now and could reduce the need for more drastic, Greecelike austerity measures in the
As the government backed up big wage rises consumer prices rose and because since there was a global food shortage it pushed up food prices. Soon after world oil prices doubled and following that inflations rose worldwide and this caused both Australia and the west to plummet into a
One of the most well known ways that the government has gotten us into this shape would be how they take away Medicare and Medicaid from the older generations to increasing the cost to go to college for the younger generation ( Jonus, 2012). The prices of gas and groceries have been on an up rise for years now and are steadily going up. This puts so much stress on the common day American that their trust in the government has diminished. When you turn on the T.V and see these politicians going on big vacations and riding around in nice fancy vehicles you start to wonder to where your hard earned money goes. It is really hard to fully grasp the idea that our government is doing the best for us and to stay calm while our country falters at the seams day by day.
However, for a terminally ill person, life can often be too sorrowful and stressful to cope with. For this reason, they wish to permanently end the battle that plagues them day in and day out. They simply want to be at rest. In this paper, I will define assisted suicide in its most basic forms. I will provide pertinent background information on a very famous case, detailing assisted suicide.