The Dangers Of Inflation Essay, Research Paper

The article Time To Pop The Party, written by Bernard Baumohl, demonstrates that

inflation is a inevitable occurrence in our society. Even though the United States economy

continues to grow and prosper it still faces the problem of inflation. Some people describe

inflation as the decrease in the value of a doller. During a period of inflation the general price

rises. In its extreme form inflation can have catastrophic effects on a nation.

No matter how much a nation may thrive economically it still must face the problem of

inflation. As shown in the article Time To Pop The Party the United States is under going a

unprecedented economic time of prosperity. The United States has been increasing its gross

domestic product every year for the past eight years, which is the longest in the history of the

United States. Consumer spending has increased and unemployment is at a record low. After all

this economic success our nation still under goes the problem of inflation.

Inflation may be caused by several different reasons. Inflation may be a direct result of

goods and services being in great demand and the economy not being able to satisfy this demand

which is called down-pull inflation. Another reason for a rise in the level of prices is when the

cost of doing buisness is increased which is called cost-push inflation. When the Federal

Reserve raises the rates of interest financial markets increase their prices.

Inflation can have disastrous effects on any economy as demonstrated in Germany

following World War one. The year before the war 4 marks could be exchanged for one doller.

But after the war 4,000,000,000,000 marks were neccessary in order to exchanged for one doller.

As a result of this drastic inflation the German people needed a barrel full of money to buy a

single newspaper. People who depend on fixed incomes are hurt by inflation because their

income loses its value. People with savings in the bank basiclly lose all their money because the

money saved loses all its value. After a great rise in the general prices a nations economy is

devastated becsuse of this our goverment takes measures to prevent inflation.

In the article Time To Pop The Party the issue of inflation is observed. Inflation causes

catostrofic effects on a nations economy which is why our goverment is concerned with the

United States economy. Our nation economy continues to flurish but inflation still occurs which

proves that a general rise in prices is inevitable.