eco-journal13

eco-journal13 - annual average of 3.5% while the inflation...

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Duc Hoang – ECON210 Journal Date: 10/18/08 Inflation usually occurs when the economy is in expansion period. However it has been proven  many times in the past that it is possible to have a very healthy and prosperous economy  without raising inflation at all. There are even examples of inflation declining while the economy  booms. As Steve Forbes, of Forbes magazine, said, “Prosperity is not the fueler of inflation.”  For example, in the 1980's, when the economy was at a major high, inflation fell from 13% all  the way to 4%. That’s an incredible drop for such a short period of time.   Another good  demonstration of a healthy economy with low secondary effects of inflation is time period  between the Korean Vietnam Wars. During this time the countries economy expanded at an 
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Unformatted text preview: annual average of 3.5% while the inflation rate stayed at a minimal amount. Our central bank, along with the Clinton Administrations and many other major economists seem to believe that any kind of growth in the economy of over 2.5% will trigger inflation. Thats why so many economists assumed that with the ever-lowering unemployment rates of recent, there would be huge increases in wages and it would sharply inflate prices. This same assumption was made because of the Federal Reserves actions in the past. In 1994 the Federal Reserve tried slowing down the economy in the fight against inflation by raising interest rates....
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This note was uploaded on 03/10/2011 for the course ECON 101 taught by Professor Duc during the Spring '05 term at Linfield.

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