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Essay / Research Paper Abstract
This 3-page paper asks if the U.S. is in danger of moving into inflationary times. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: D0_MTinflatus.rtf
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Unformatted sample text from the term paper:
frightened of it, he initiated policies in the 1990s that, some believe, precipitated both the dot-com crash of the late 1990s and the more recent sub-prime mortgage crisis.
But what about Greenspans successor, Ben Bernanke? Bernanke also has a fear of inflation. Steve Hanke (2008), in a recent column, pointed out that
as long as inflation is at or below the target level, Bernanke and his Federal Reserve cohorts tend to panic at "the sight of real or perceived economic trouble and
provide emergency relief" (p. 108). Still, Bernanke has been distressed enough by the recent sub-prime fallout to continue cutting the interest rates, even at the risk of boosting inflation.
But is the U.S. economy in danger of falling into inflationary times? Lets first examine
how the Federal Reserve handles the money supply. When the economy is in a recession, the Fed cuts interest rates (in other words, the cost of borrowing money) to help
encourage businesses to borrow more. The theory goes that once businesses borrow, they have more money for capital investment, for hiring employees, and so on. Employees have money to spend,
they spend it on products and services, increasing demand, thereby increasing production, jobs, and so on. To try to cool down an overheated economy, the Fed will hike interest rates,
again to slow things. The Fed can also authorize more dollars to be pumped into the economy in the event of a crisis, but this is used carefully, as too
many dollars chasing too few goods means inflation. But the culprit to inflationary fears isnt too much paper money at this point.
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