Inflation refers to a rise in the general level of prices of the goods and services we purchase for a period of time, so it is important to determine the inflation rate of our economy in a timely basis. This is to determine what courses of action we should take, including demands for higher wages, increased prices, and more. The current inflation rate of the U.S. for the month of January is about 4.28%, and is projected to go down little by little in the following months (Foldvary).
The inflation rate need not be a worry for us, but we should be aware about it. As of now, we are in a time of stable prices, but these prices may change depending on various situations, which could affect the inflation rate. It is important to determine expected inflation since it is an important basis of the economy’s future inflation. This is because if there is no definite value given for the inflation and the public expects a higher inflation, then it would lead to workers demanding higher wages. This would in turn affect employers, forcing them to raise the prices of their goods, thus resulting to the higher actual inflation.
The current unemployment rate for the country is 4.9% in January of 2008, according to the Bureau of Labor Statistics. The unemployment rate doesn’t necessarily mean that it could lead to deflation. Rather, it’s the other way around. Deflation makes it possible that real wages are raised, making it difficult and costly for the management to lower. This would result to layoffs and the employers are reluctant to hire new workers, thus leaving many people unemployed.
The current market structure that the country have can be classified as a natural rate of unemployment, wherein it falls under the lowest rate of unemployment that a stable economy is able to achieve, which ranges from 1% to 5%. This could be due to the non-accelerating inflation, wherein it stays at a certain level that is comparatively tolerable for the country. This structure results to a non-moving or non-accelerating inflation, since it is relatively lower posing no real threat to the economy.
The current Gross Domestic Product Growth Rate is 4.6%. This is after a .6% slump from last year’s 5.2%. This could be accounted to the decline of the US dollar, which didn’t help the exports situation. This is because of still higher prices of imports like oil, which offsets the higher exports in terms of dollars (Forecasts.org).
According to Forecasts.org, the GDP will continue to slow down in the following months. It showed that both February and March of 2008 have 4.60% GDP growth rate. The months of April, May, and June have 4.50% GDP growth rate, while the month of July only has 4.20%. This continuous decline could be caused by unsettled economic problems and the continued weakening of the dollar (Forecasts.org).
The distribution of wealth among each fifth of the families consistently show that the poorest group receive the least, while the richest fifth receive most of the total income, reaching more than 40% of the total. This has been the trend even before, wherein most of the rich people receive the greatest part of the income. The poorest receive the least, while those in between weren’t far from each other (Levy).
This is not a fair type of distribution since the rich are getting richer and the poor are getting poorer. This has been the trend even before, the only difference is that there is an increase in each of the families’ income. This could be because of the increasing prices of commodities that they have to strive for better paying jobs.
Foldvary, Fred E. “Inflation, Employment and Money”. 1997. February 24 2008.
Forecasts.org. “U.S. Nominal Gdp Growth Forecast”. 2008. February 24 2008. <http://www.forecasts.org/gdpgrowth.htm>.
Levy, Frank. “Distribution of Income”. 1990. February 24 2008. <http://www.econlib.org/library/Enc/DistributionofIncome.html>.