Inflation

Let’s talk about inflation (yay!). The video lecture discussed how inflation (rising prices) is not necessarily a bad thing as long as it doesn’t go too high, with the Fed target rate (best rate) being about 2% yearly. In 2020, with changing economic conditions due to the pandemic, the Fed decided to allow inflation to rise slightly above that goal, to 3 or 4%. Below is a link to the video of our Fed Chairman Jerome Powell stating the reasons for changing the policy. Give it a watch, it’s not that long, lol. Don’t worry… you don’t have to understand everything he says, just listen for key words and you should get most of it. To be honest, he speaks very straightforward and avoids those pretentious terms that no one understands, but makes his statements clear to anyone, which I like. Then, read the Inflation Article also attached, which goes over inflation expectations for 2021, and use both to answer the following talking points:

Why is inflation a good thing for the economy? What are some of the net positive effects it has? (Hint: has to do with Investment and Unemployment!)
What was the Fed hoping to accomplish by allowing inflation to rise in 2020? (Hint: The answer lies in the Phillips Curve, sacrificing one goal to achieve another!)
With 2021 things are vastly different! Using the information in the article, what do you see happening to prices for the remainder of the year? Do you think there will be pent up demand, and what will that do to prices/inflation, unemployment, etc.? (Use AD/AS model to explain– you don’t have to draw it, just reference it)
Sum things up in regards to what you see happening in the economy for the 2nd half of 2021, and on into 2022. I’m looking for an educated opinion backed up with facts & data. You don’t have to cite your data, but make sure you aren’t going on feelings, what you want to happen, or anything else that can’t be supported with economics.  
As before, your work should be at least a page in length, and a true page! This means if you use MLA formatting where the heading takes up 1/3 of the page, you have to write more to make up for that.   

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