Eye Crosser #5: What is Inflation?

First, of course, a definition from Investopedia.  At the website, scroll down the page a little under the definition.  Investopedia offers a very short video presentation of what causes  inflation.  Just above the inflation video is a link to an Inflation Tutorial.

The Inflation Rate is managed by the Federal Reserve Bank  (referred to as “the Fed”)  in the United States.  The Fed’s definition of inflation is:

Inflation is a sustained increase in the general level of prices, which is equivalent to a decline in the value or purchasing power of money. If the supply of money and credit increases too rapidly over time, the result could be inflation.

The Fed uses monetary policy to influence the amount of money and credit in the U.S. economy. Check out their website for more information about monetary policy.  According to the Fed, the goals of their monetary policy are:

  • promote maximum employment
  • stable prices
  • moderate long-term interest rates

There has been  a movement by some to abolish the Fed. More about that later. Also, more about whom the Fed is, in another post.

Author’s notes (8/31/16): Subsequent to the above posting I have written several other related blog posts regarding “Inflation.” Here they are:
Inflation…Deflation? Who ya gonna call?
When will the Federal Reserve Bank raise interest rates?
The Fed finally made their move!
Federal Reserve policy in the year 2016
Meet the FOMC (Federal Open Markets Committee) of the Federal Reserve Bank
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Fierce

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