Wednesday, November 14, 2007

Week Nov. 12- Nov. 19 Assignment 2 Inflation

1) The inflation of the U.S. is a key piece to determine important economic strategies. For the past 20 years the inflation rate has increased at a steady pace. The production price index since 1980 has increased at an even keal as for every ten years, the price index increases at about 25. For the CPI it is a different story as there is less inlfation as the prices since 1980 has decreased at an uneven rate. So for the PPI and the CPI, there is no pattern as for the past 20 years, each price index has either decreased or increased with the same slopes. The PPI has stayed at a positive slope and the CPI has stayed at a negative slope.

2) When the price indexes are different and the slope of each line is the opposite, there are certain factors that have caused this occurance. This difference in the price indexes is caused by the consumer demand for a time period of when the prices are either falling or rising. Supply and demand are constantly changing which causes the price indexes and yearly numbers to never be at a constant rate. This has happened over the past 20 years and has caused inflation to be different as the factors of demand and production has made this occurance happen.

3) The price index that I would want to have to adjust my wages and salary is the Production Price Index. I would pick this price index because over the past 20 years, this price index has increased every ten years and as the demand for good increases, then the production will also. With increasing price index, my wages and salary will also increase as the nation's income with rise.

4) With the situation of adjusting my employees wages and salary, I would choose the production price index. PPI would be my choice because consumers affect demand and when demand is low then prices decrease causing more consuming and more production. When this happens, there will be more money to circulate will make wages increase and more demand for jobs. Also this will cause more output and more production causing the income to rise.

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