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Chapter 22: Q 17 (page 553)

Over the last century, during what periods was the U.S. inflation rate highest and lowest?

Short Answer

Expert verified

There is more than one instance when this happens.

Step by step solution

01

Step 1. Definition

Inflation is the rate at which prices increase over a period of time. Inflation is a broad measure, For example, the increase in prices or the increase in the cost of living in a country.

02

Step 2. U.S.

In United States, period of deflation that is negative inflation is the period of world war I and world war II .

In 1930 inflation in the US was at its lowest. The reasons behind this is that time most banks were unregulated and uninsured and also because of feds policies . This was a period of great depression.

And highest level of inflation was in 1970 ,because of various reasons like central bank policy, Keynesian economic policy, the abandonment of the gold window, etc. all contributed to this.

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Most popular questions from this chapter

The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1=£940, year 2=£970, year 3=£1000, and year 4=£1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.

Why do you think the U.S. experience with inflation over the last 50 years has been so much milder than in many other countries?

Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?

Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the CPI to convert from nominal to real would be more appropriate than using the GDP deflator.

If, over time, wages and salaries on the average rise at least as fast as inflation, why do people worry about how inflation affects incomes?
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