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INFLATION Can Our Economy Grow Without It INTRODUCTIONWhat is inflation The definition of inflation according to Websters Revised Unabridged Dictionary is an undue expansion or increase from overissue Hypertext 1 Although Websters is considered by most to be the overall best dictionary WordNet states the meaning of inflation a lot clearer by saying its a general and progressive increase in prices Hypertext 1 It occurs when the value of goods rises faster than the value of money The usual approximate measure of this is the Consumer Price Index which weigh the prices of different goods according to importance in a typical budget and then shows how much the prices of these goods have increased This immediately raises some problems for example the weight of the goods must change over time The importance of computers was not measured in the price index 100 years ago Another problem is the failure of the price index to capture changes in quality The quality of a good may have improved by 20 while the price has only risen by 10 The consumer price index doesnt feel this should be a factor but many would disagree Hence inflation is not easy to define in practice This should be kept in mind when discussing how to defeat inflation DISCUSSION There have been numerous theories on how to defeat inflation and even some theories on whether or not it should be defeated at all Some say that inflation is not only expected but often needed Economists believe that in order for the economy to expand and grow there has to be some level of inflation Therefore the opposite holds true as well If you want to lower inflation you have to accept a semi-standard economy They call this tradeoff the Phillips Curve The Phillips Curve is thought to be the proper way of balancing economic growth and inflation For this reason the Federal Reserve is always looking for
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