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Inflation in the American Economy

Inflation, the tendency of prices to increase from year to year (or, to put the same thing in different terms, the steadily declining purchasing power of the dollar) has for some years been a preoccupation of Americans, in their daily lives and in public policy. Middle-aged Americans can remember a time when a family of four could eat out for ten dollars, and a new car could be bought for $2500. In general, consumer prices when John F. Kennedy was President stood at little more than one-fifth their present-day level.

After some years of near stability in the 1950s and early to mid 1960s, prices began to increase in the later 1960s. By the end of the 1970s, prices were increasing by ten percent or more each year. For consumers, it seemed that every trip to the grocery store meant paying more for the same products. Wage and salary increases were eaten up by these higher prices; families' real income, in terms of what they could afford to buy, often went down even as dollar income went up. People found themselves pushed into higher tax brackets, though they were no better off, and for unskilled workers, the real value of the minimum wage dropped by a third.

In addition to this frustrating individual impact on ordinary families, inflation put pressures on the American economy as a whole. Investment was shifted from the production of good and services to such things as purchasing real estate, which was believed to be a hedge against inflation. News of vigorous economic expansion caused the stock market to drop, because investors feared that rapid growth would only trigger more inflation, eroding the value of their assets. "What to do about inflation" became a popular subject of popular books, e.g., George Jackson Eder's What's Behind Inflation and How to Beat It (1979).

In recent years, inflationary pressure has greatly subsided as a feature of daily life. Although prices have not returned to the stability of the ea...

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Inflation in the American Economy. (1969, December 31). In LotsofEssays.com. Retrieved 07:12, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1690446.html