Why Deflation Doesnt Happen During a Recession

When there is economic expansion, demand seems to outpace supply, particularly for goods and services that take time and major capital to increase supply. As a result, prices generally rise (or there is at least price pressure), particularly for goods and services that cannot rapidly meet the increased demand, such as housing in urban centers (relatively fixed supply), and advanced education (takes time to expand/build new schools). This doesnt apply to cars because automotive plants can gear up pretty quickly. Conversely, when there is an economic contraction (i.e. recession), supply initially outpaces demand. This would suggest that there would be downward pressure on prices, but prices for most goods and services dont go down and neither do wages.  Why do prices and wages appear to be sticky in a downward direction? For wages, corporate/human culture offer up a simple explanation: people do not like to give pay cuts... managers tend to lay off before they give pay cuts (though there exist some exceptions). That said, this doesnt explain why prices dont go down for most goods and services. In  Why Does Money Have Value, we saw that changes in the level of prices (inflation) were due to a combination of the following four factors: The supply of money goes up.The supply of goods goes down.Demand for money goes down.Demand for goods goes up. In a boom, we would expect that the demand for goods to rise faster than the supply. All else being equal, we would expect factor 4 to outweigh factor 2 and the level of prices to rise. Since deflation is the opposite of inflation, deflation is due to a combination of the following four factors: The supply of money goes down.The supply of goods goes up.Demand for money goes up.Demand for goods goes down. We would expect the demand for goods to decline faster than the supply, so factor 4 should outweigh factor 2, so all else being equal we should expect the level of prices to fall. In  A Beginners Guide to Economic Indicators we saw that measures of inflation such as the Implicit Price Deflator for GDP are pro-cyclical coincident economic indicators, so the inflation rate is high during booms and low during recessions. The information above shows that the inflation rate should be higher in booms than in bursts, but why is the inflation rate still positive in recessions? Different Situations, Different Results The answer is that all else is not equal. The money supply is constantly expanding, so the economy has a consistent inflationary pressure given by factor 1. The Federal Reserve has a table listing the M1, M2, and M3 money supply. From Recession? Depression? we saw that during the worst recession America has experienced since World War II, from November 1973 to March 1975, real GDP fell by 4.9 percent. This would have caused deflation, except that the money supply rose rapidly during this period, with the seasonally adjusted M2 rising 16.5% and the seasonally adjusted M3 rising 24.4%. Data from Economagic shows that the Consumer Price Index rose 14.68% during this severe recession. A recessionary period with a high inflation rate is known as stagflation, a concept made famous by Milton Friedman. While inflation rates are generally lower during recessions, we can still experience high levels of inflation through the growth of the money supply. So the key point here is that while the inflation rate rises during a boom and falls during a recession, it generally does not go below zero due to a consistently increasing money supply.   In addition, there may be consumer psychology-related factors that prevent prices from decreasing during a recession- more specifically, firms may be reluctant to decrease prices if they feel like customers will get upset when they increase prices back to their original levels at a later point in time.

Problems Face by Earth - 948 Words

As our country fast growing , the technology field had also developed . This development brings a lot of changes in our life , making our life easier than the past . But this development also brings negative effects to our life . One of the greatest effect that we face now is global warming . Global warming is when the earth heats up (the temperature rises). It happens when greenhouse gases (carbon dioxide, water vapor, nitrous oxide, and methane) trap heat and light from the sun in the earth’s atmosphere, which increases the temperature. This hurts many people, animals, and plants. The greenhouse effect is when the temperature rises because the sun’s heat and light is trapped in the earth’s atmosphere. This is like when heat†¦show more content†¦They can kill plants and trees by destroying their leaves, and can kill animals, especially fish in highly polluted rivers. Air pollution has many disastrous effects that need to be curbed. In order to acco mplish this, governments, scientists and environmentalists are using or testing a variety of methods aimed at reducing pollution .There are two main types of pollution control. Input control involves preventing a problem before it occurs, or at least limiting the effects the process will produce. Five major input control methods exist. People may try to restrict population growth, use less energy, improve energy efficiency, reduce waste, and move to non-polluting renewable forms of energy production. Also, automobile-produced pollution can be decreased with highly beneficial results. Output control, the opposite method, seeks to fix the problems caused by air pollution. This usually means cleaning up an area that has been damaged by pollution. Input controls are usually more effective than output controls. Output controls are also more expensive, making them less desirable to tax payers and polluting industries. In conclusion , we have to preserve and conserve the earth for the upcoming generations so that they have chance to enjoy the beauty and the miracle that happens in earth . So , we have to take action starting from today because what we doingShow MoreRelatedThe Problem Of Climate Change904 Words   |  4 PagesClimate Change Have you ever wonder that what is our true enemy of the earth? Would what people had done will be alright? If we look at the world crisis now a day, people might know that everywhere around the world the number one problem probably be climate change. In the past, one thousand the world we live never change so much. But what happened is in 5 years we have seen something that is quite difficult to be seen such as earthquake, flood, and hurricane. There is the anger of nature that isRead MorePersuasive Speech Outline The Importance of Recycling Essay702 Words   |  3 Pagesthe Earth. Central Idea: You should recycle materials because it can help the Earth save i. Introduction (Attention) A. Attention getter – How many people read a paper on a daily bases? How many people throw it in the trash when they are done? How many people drink some sort of bottled drink throughout the day? How many of those people throw it in the trash when they are done? B. Relativity – There in lays the problem. Too many people do not recycle and it is slowly killing this Earth. WhenRead MoreEnvironmental Problems Caused By Deforestation1055 Words   |  5 Pagesthe modern industrial period, living beings were not having problems such as losing their habitats or worrying about the water and the oil spilled in the ocean. People at this time live in different types of environment that are constantly changing because humans are overusing the natural resources that the Earth provides to them. The planet is going through a lot of environmental problems. These problems affect all the living beings on Earth. Some of the examples are global warming, pollution of airRead MoreThe Space Settlement Of Space880 Words   |  4 Pagesexistence is now facing problems on earth and is in need of a new home, the space settlement. Space settlement is a simple concept developed to overcome the dangers which the human species is facing and would face in the futu re. It is a complex structure providing the essential needs for a person to live, which is constructed in space. In simple words, a habitat in space. It would be something where people would live, work and survive their life. The space settlement will orbit the earth with equal accessRead MorePollution And Its Effects On Humans1131 Words   |  5 PagesPollution 1. The Problem I. Pollution is killing Earth a. Smoke from cars b. Pesticides c. Toxic waste in water II. Air pollution a. Causes problems with Earth and Humans i. Allergies ii. Weaken immune system iii. Cause/ make asthma and bronchiolitis worse iv. Cause heart problems III. 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Automobiles and other forms of transportation emit dangerous toxins, along withRead MoreEcological Problems1509 Words   |  7 PagesEcological Problems: The disease is not the cure The entire human population, the young, the old, the rich, the poor, the governed, and the governors, stand at a very dangerous precipice. That precipice is the degradation of the natural environment: the cutting down of the rainforests, the pollution of the air and water, climate change the overconsumption of resources and energy that are not renewable, the list goes on. Some have surmised that corporations and the invisible forces of the marketRead MoreIllegal Drugs : Source And Solution And It s The Problem Essay1451 Words   |  6 Pages What is the most commonly used drug in the U.S. Young people take more drugs than before. High school students drank alcohol and smoked drugs. People want to change. People think drugs are the solution and it’s the problem. The consequences of drugs are worse than the real problems they had before. You shouldn’t take drugs. Different drugs. They change drugs. Marijuana most used drug. Illegal Drugs ââ€"  Drugs have been part of the world since the middle of the 20th century. Popularized in the 1960sRead MoreDifferences Between The Stories Bat And The Color Of Earth 874 Words   |  4 PagesBat by Francesce Lia Block, Alice’s Adventures in Wonderland by Lewis Carroll and The Color of Earth by Dong Hwa Kim. Each of these books are mainly for girl readers and it shows female characters facing changes as they are maturing from young children to young adults. On the surface there are a lot of similarities between the stories Alice’s Adventures in Wonderland, Weetzie Bat and The Color of Earth. The main characters Alice, Weetzie and Ehwa have a journey or an adventure they are going throughRead MoreThe Theory Of Plate Tectonics1487 Words   |  6 Pagesof plate tectonics says the lithosphere is split into different plates that move around on top of the surface of the Earth. Though it is just a theory geologic time, ocean trenches, seafloor spreading, mountains, volcanoes, and earthquakes are all examples of evidence that support the theory of plate tectonics. Geologic time shows sediment patterns in different layers of the Earth. Geologic time is separated in three main periods called the Cenozoic Era, the Paleozoic Era, and the Mesozoic Era. These

The FairTax Essay example - 1386 Words

People do not enjoy talking about taxes because they are too political, confusing, and depressing. It is no secret that the American tax code is a mess and something many economists describe as too broken to fix. Despite this, politicians have never stopped from trying to â€Å"fix† the code, yet they have had very little success. The U.S. Government’s tax code currently comprises â€Å"more than 67,000 pages of complexities† (Boortz, Linder, Woodall 14). The Americans for Fair Taxation (AFFT) was founded in 1995 with one goal: create the simplest and best tax reform plan that would work in the modern market and economy. The AFFT’s best solution was a bill which they promptly called the FairTax. What is the FairTax? Many people have not heard†¦show more content†¦Both coauthors explain â€Å"the myth of corporate taxes† with two statements: â€Å"When it comes down to it, no corporation or business really pays taxes,† and therefore, â€Å"the burden of it all falls on us [the taxpayers]† (32). They continue their explanation with another claim: â€Å"The economic education of Americans is so woefully inadequate that many of us actually think we pay less as individuals when the taxes are transferred to businesses and corporations† (31). To illustrate their point, the authors created a fictional corporation with simple guidelines. Although not their actual example, the following is similar: Qwerty Inc., a manufacturer of computer keyboards, has 200 employees and 100 shareholders. At the end of the year, Qwerty Inc. sold 1000 keyboards at $100 dollars each; therefore, the yearly income was $100,000. After labor, cost, taxes, and other charges, Qwerty’s profit is $2000 for the year. If the government adds a 10% corporate tax increase, Qwerty now owes an additional $200 in taxes. According to Boortz and Linder’s logic, Qwerty has several possibilities to balance the budget from the tax i ncrease: the shareholders could see their dividends decrease, the price on the keyboards could be raised, some employees could be fired to save on cost, or employee benefits could decrease to cover the cost of the tax increase. This simple example demonstrates the current tax code’s consequences on the taxpayers (citizens and consumers) and introduces â€Å"the embeddedShow MoreRelatedEssay about Fair Tax: Avoidance of Taxes1696 Words   |  7 Pagespresident of Let Voters Decide - the 501(c)(3) non-partisan organization advocating for reform - the â€Å"upshot would be ‘a better, broader tax base,’ while the taxes paid would depend on the consumer choices that people make,† (Mannies, 2011). In The FairTax Book, the designers of the â€Å"Fair Tax† concept assert that the poor would benefit from the proposal because their income taxes would be omitted (Moody, 2011). However, this ignores the fact that if this were to be only state law and not federal, MissouriansRead MoreBenefits of the FairTax Act1893 Words   |  8 PagesThe FairTax Act Many debates have been waged over the decades on what will be taxed, on who shall be taxed and how taxes are collected. Since the 16th Amendment was ratified in 1913, the debate has intensified, centering on how high to make the income tax rate. Most Americans were not concerned since the Amendment was sold to them as something that would only affect corporations and the rich. With ever increasing fervor these corporations created lobbyists to convince Congress to exempt themRead MoreThe Fair Tax Essay example1034 Words   |  5 PagesTaxes are unavoidable because government is needed and government operates on tax revenues. 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Not enough evidence of practicality and beneficial results of FairTax to justify risks Pretty much everyone would agree thatRead MoreAlternatives to the Us Tax System2212 Words   |  9 PagesFoundation estimates that $338 billion of time, energy, money, and other resources, are spent annually completing tax returns.[2] Three main proposals, the Flat Tax, the VAT Tax, and the FairTax, are being hailed on the Hill today as the solution to our current onerous tax system. While all have benefits and draw backs, the FairTax is the best alternative to the U.S. Tax System in that it is the only tax that reduces the tax burden on Americans by taxing the underground economy, simplifies the tax system,Read MoreShannyn Griffin. Professor Jones. English 1102, Section1903 Words   |  8 PagesShannyn Griffin Professor Jones English 1102, Section 22 29 April 2017 Replacing the Current Income Tax Structure with the FairTax Plan It is the general agreement of tax payers everywhere that the current tax system is way too complicated. You either need to have a certified public accountant help you do them or a specialized tax program to walk you through it. Not only that, but the costs associated with having someone prepare your taxes or buying the specialized computer program needed toRead MoreNo Taxation without Representation Essay1851 Words   |  8 Pagesrate, with no deductions, and no loopholes! By eliminating loopholes, the tax base and tax revenue would increase substantially. Comparison: FairTax The FairTax is a transparent federal sales tax based on consumption in which an individual receives the full amount of wages owed but are taxed during the purchase of a commodity. 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An already existing American movement, called the FairTax Movement, believes in eliminating federal income taxes and replacing it with a nationwide 23 percent sales tax. On one hand it encourages people to work harder, since before there may not have been a desire to work longer and harder when that extra

Light A Fundamental Force In Our World Essay Example For Students

Light: A Fundamental Force In Our World Essay If asked what light is, one could say that its one of the most basicelements of our world and our universe as we perceive it. It is throughsight that we receive 90% of our information. It is through the use oftelescopes aiding the naked eye that we are aware of the heavenly bodiesaround us. It is through light that the energy from the sun is transferredto us. The suns energy supports the food chain; plants use it to turnwater and CO2 into energy usable by other organisms. Solar energy was alsoused, indirectly, to produce all of the fossil fuels that we consume daily. Since light is such a basic part of our existence, we should have a basicunderstanding of what it is. What we call light, the intangible, powerful force that powers our world,is somewhat hard to define in real terms. It shares properties with bothparticles and waves. It follows the same rules as a wave doesit moves ina regular fashion, in a perfect sine wave at a certain frequency. Ittravels in a straight line, and is subject to refraction. All of thesecharacteristics are found in waves of any type, from radio frequency waves,up to Gamma and X- rays. Light, however, also exhibits qualitiescharacteristic of particles such as neutrons and protons. A photon, orquanta, is the packet of energy that is sent in a light wave. Like aparticle, the photon is believed to have a finite mass, and has the abilityto affect other matter. As light strikes a photovoltaic solar cell, itknocks electrons in the silicon atoms on the surface into a higher state ofenergy. When these return to their normal, or ground state, energy isproduced in the form of electricity. Thus, light is termed awave-particle, an d this property is called the wave-particle duality ofnature. Many questions concerning what makes up light still lieunanswered, but this much is thought to be true. Light can be produced in a variety of ways. Our sun, like other stars,uses nuclear fusion to produce energy in the form of light and radiation. We can produce light artificially using several methods. If one starts afire, it produces light and heat. (Heat, which is infrared radiation, isanother type of light energy.) The light and heat are a result of achemical reaction, the combining of oxygen with the carbon in the wood. This reaction leaves behind products which have less potential energy thanthey started with. The energy, which left as light and heat, was producedwhen electrons dropped in energy levels during the reaction. The excessenergy from one atom was given off as a photon, producing light. If oneexamines a fluorescent or incandescent light bulb, one can see that all itis doing is having electricity stimulate a metallic or gaseous substrate,causing it to give off photons. The principle is the same as it was withthe fire, only it is more controlled. Still more controlled is the laser,which puts out its photons in a single frequency. This is achieved througha carefully designed apparatus which stimulates materials in a way thatallows them to only put out light at a certain wavelength. Laser light is,therefore, of all one color. White light, or sunlight, is a broad mixtureof wavelengths. All methods of producing light, natural and artificial,share one common feature: they rely on electrons chang ing energy levels toproduce the photons. As there are a variety of methods of producing light, so are there amultitude of ways it can be applied. The most obvious use of light is insupporting our food chain. Without light energy, nothing could live on ourplanet. The plants, which are at the bottom of the food chain, supplyenergy to all other organisms. We as humans are adapted to having sunlightaround us, and taking in information with our eyes. Aside from keeping usalive, light is also employed in highly specialized applications. Laserlight is being used in surgery. The highly concentrated beam of light isfar more precise than any surgeons hand, and much finer than the sharpestblade. In the area of communications, light is used in fiber optic networksfor fast, crystal-clear connections. (Fiber optics allow light to travel ina finely directed path with very little distortion.) Optical components incomputers are starting to see use. Also, lasers are being used to produceholographic images, both for industrial and commercial markets. Holographicpictures can show an object three dimensionally, and in great detail. .u7159df793e190177a6726fe26501d8d2 , .u7159df793e190177a6726fe26501d8d2 .postImageUrl , .u7159df793e190177a6726fe26501d8d2 .centered-text-area { min-height: 80px; position: relative; } .u7159df793e190177a6726fe26501d8d2 , .u7159df793e190177a6726fe26501d8d2:hover , .u7159df793e190177a6726fe26501d8d2:visited , .u7159df793e190177a6726fe26501d8d2:active { border:0!important; } .u7159df793e190177a6726fe26501d8d2 .clearfix:after { content: ""; display: table; clear: both; } .u7159df793e190177a6726fe26501d8d2 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u7159df793e190177a6726fe26501d8d2:active , .u7159df793e190177a6726fe26501d8d2:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u7159df793e190177a6726fe26501d8d2 .centered-text-area { width: 100%; position: relative ; } .u7159df793e190177a6726fe26501d8d2 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u7159df793e190177a6726fe26501d8d2 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u7159df793e190177a6726fe26501d8d2 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u7159df793e190177a6726fe26501d8d2:hover .ctaButton { background-color: #34495E!important; } .u7159df793e190177a6726fe26501d8d2 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u7159df793e190177a6726fe26501d8d2 .u7159df793e190177a6726fe26501d8d2-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u7159df793e190177a6726fe26501d8d2:after { content: ""; display: block; clear: both; } READ: How Can We Help the Homeless and Should We?: Searc EssayFinally, new ways of utilizing the suns energy are being developed thatwill allow light to be more efficiently converted to electricity. Thus,light indeed has a wealth of applications. It must be remembered that, like most other things around us, light issomething utilized on a daily basis, yet little understood. With continuedresearch, we may someday unravel the mysteries surrounding this uniqueforce which is constantly at work in our universe. The applications oflight in the present are nothing compared with what could be gained if wecould understand this strange mechanism; it may someday be the key tosolving our energy problems, or unlocking the secret of the universe.