Inflation

    Inflation has been a very big problem for a very long time. This essay discusses three major issues that occur as an effect of inflation. One being how the increase in inflation affects poverty rates, two being how some aspects of inflation can be good for the economy, and the last point will be talking about what causes inflation rates to rise in the first place. 

    High inflation tends to hit income and savings much harder for the low-income and middle-income households rather than wealthier households. Neighborhoods with people that have recently escaped from poverty may be pushed back into it as an effect of rising inflation. One example could be how gas prices have increased because of inflation. According to this study which analyzes how much gas prices have increased over the past twenty years in the United States of America, the inflation rate for the price of regular gasoline has increased by 5.8% over twenty years[AV1] . (U.S. Bureau of Labor Statistics) While that may not look like much, this percentage represents a very evident rise in inflation in the USA. This is just one example, out of many more[ES2] , on how inflation has effected the costs of just regular utilities. Which has made the life of people with a lower income just a little bit harder. A few years ago my family took in a couple from our church. We had become quite close with them and so they were already good family friends. Because of the high rise in inflation they were pushed into poverty and had to sell their house and their car. They came to live with us for a while and we helped them get back on their feet. Even though I wasn’t very old at the time, I was still able to reflect to a certain degree on their situation. I couldn’t believe that the decreasing value of money had been able to completely kick someone out of their own lives just like that. From that day forward I have always tried to stay mindful and remember that there are people in the world who are struggling much more than me, and to therefore remain humble.[AV3] 

    While inflation can have some very bad effects on people from poorer parts of the world and people with low and middle class incomes, some aspects of inflation can actually have some very good effects on the economy. For example, in order to match the amount of money value being lost, more dollars are having to be made. The more money there is, the more people are spending, which equates to more aggregated demand. This means a growth in “the total demand for goods and services within a particular market.” - Google Definitions. The more demand there is, the more production to that demand is triggered. If inflation didn’t exist, then aggregated demand would be reduced greatly, which in turn would lead to less production, arrangements for layoffs would have to be made, and our economy would falter. After my first encounter of really seeing what inflation is capable of doing in and to peoples lives I was a bit skeptical. It was difficult for me to be able to understand why and how inflation could be good in any way. But, as I read more I discovered that it can actually benefit the economy in some very advanced ways. That fact alone let me open my mind just a bit and allowed me to see that not all aspects of inflation are terrible, some of them maybe even necessary.

    There are a lot of things that cause inflation to rise to the amount that it has. One of the main things that makes inflation rise is when the Federal Reserve sets too low of an interest rate. Another thing that tends to cause a lot of rising in inflation is when the growth of money supply increases to rapidly. This means that there is too much money to go around, this in turn causes the value of money to decrease. If aggregate supply falls but aggregate demand stays unchanged, this puts a lot of pressure on prices and inflation. In other words, inflation in pushed higher.er. At this point I was pretty sure that I knew everything there is to know about inflation but could not have been more wrong. I didn’t even know what events caused inflation to rise and fall. But, as I discovered more, I realized that there is no real way to eliminate inflation. When I first learned about inflation I thought “Why can’t we just stop decreasing the value of money? That would solve all of our inflation problems. Right?” But since then, I have learned why doing that would be virtually impossible and how some of the things that cause a rise in inflation are connected to much more and are part of a bigger picture that is too complex to try and mess with.

    In conclusion, inflation tends to hit the households with people who have low or middle-income jobs harder than it hits households with high-income jobs Even though inflation can have bad effects on poverty rates, some aspects of inflation actually do good things for the economy. One example of this would be increasing production. Finally, a rise in inflation is caused by all sorts of things. For example, inflation is pushed higher when aggregate supply falls but aggregate demand remains unchanged.