Inflation and Government Economic Policies
Inflation is a measure of how prices have changed over time. If prices are changing due to inflation, each dollar spent will buy less.
In order to answer the questions below, go to the following website: http://www.bls.gov/cpi/
Questions:
- What is inflation? What are the causes of inflation? Is inflation desirable and what can be done to control inflation in a market economy?
- What is the Consumer Price Index (CPI)? How has the CPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CPI for this period and cite your source.
- What is the Producer Price Index (PPI)? How has the PPI behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the PPI for this period and cite your source.
- What is the Consumer Expenditure Survey (CE)? How has the Survey behaved since the year 2000? What have been the causes of these changes? In your response, include a graph of the CE for this period and cite your source.
- What do the measures above tell us about consumer behavior? Have incomes changed enough to offset the inflation since 2000? What can we predict about future inflation?
- What are the implications of these measures for government economic policies?
By the due date assigned, create a Microsoft Word file to collate your answers and submit it to theSubmissions Area.
| Assignment 2 Grading Criteria | Maximum Points |
| Explained inflation. Identified the causes of inflation. Explained whether or not inflation is desirable and offered a rationale. Identified ways to control inflation in a market economy. | 40 |
| Explained the Consumer Price Index (CPI). (8 points) Outlined the CPI behavior since the year 2000. (8 points) Identified the causes of the changes in the CPI over this time. (8 points) Provided a graph of the CPI for this period and cited the source. (8 points) | 32 |
| Explained the Producer Price Index (PPI). (8 points.) Outlined the PPI behavior since the year 2000. (8 points) Identified the causes of the changes in the PPI over this time. (8 points) Provided a graph of the PPI for this period and cited the source. (8 points) | 32 |
| Explained the Consumer Expenditure Survey (CE). (7 points) Outlined the CE behavior since the year 2000. (7 points) Identified the causes of the changes in the CE over this time. (7 points) Provided a graph of the CE for this period and cited the source. (7 points) | 28 |
| Explained what the CPI, PPI, and CE measures can tell us about consumer behavior. | 8 |
| Identified changes in income since 2000. | 4 |
| Explained whether or not the changes in income offset the inflation for this period. | 8 |
| Identified viable predictions about future inflation. | 8 |
| Researched impact of CPI, PPI, and CE measures on the economy. Discussed the implications of these measures for government economic policies. | 20 |
| Style (4 points): Tone, audience, and word choice. Usage and Mechanics (4 points): Grammar, spelling, and sentence structure. APA Elements (12 points): In text citations and references, paraphrasing, and appropriate use of quotations and other elements of style. | 20 |
| Total: | 200 |
Answer PreviewInflation is the increase in prices of commodities and the fall in the purchasing value of money. Demand push inflation occurs when the demand for goods and services increases beyond an economies capacity to produce them. Cost push inflation is caused by the increase in prices of production inputs such as raw materials and the cost of labor (Galí, 2015). Inflation is desirable when it is low but not too low since it may lead to deflation. Inflation…
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