Inflation is No Myth
http://money.usnews.com/money/personal-finance/articles/2013/12/31/6-things-that-will-cost-more-in-2014
In class we defined the rate of inflation as the percentage change in the general price level of a basket of goods from one period to the next. According to the article, inflation in the United States is relativity low at 1.2% but recently the Bureau of Labor statistics expects some consumer goods to have a higher inflation rate than others. The term market clearing helps explain this phenomenon that states prices are flexible so supply can equate to the demand. However, in the short run of the economy, prices are generally sticky and don't move drastically in either direction.
Food prices impact the college students spending on a daily basis. The U.S. Department of Agriculture predicts food prices to raise by 3% overall. Other food products are expected to inflate above this 3% level that include: beef, chocolate, bread, and cereal. These items are generally included in the college students basket of goods and may decrease spending power substantially. The reason for a spike in specific food prices is because demand for popular brands are continuing to increase. Beef is expected to inflate in price from 3% to 6%. The raise in the cost of wheat and flour, bread and cereal prices are expected to raise by 4%-5%.
Clothing is an essence when it comes to college students because they are always attempting to look better to impress their colleagues and impress that special college sweetheart. Clothing prices are expected to raise anywhere from 5% to 8% in 2014. The causation of this drastic raise comes from a psychological effect on manufactures that plan to raise their prices regardless. Poor crop conditions is another causation in making clothing more expensive because farmers need to use their fields for alternative crops rather than cotton.
First-class stamps for the next two years will raise by three cents. This is to help relieve the $2.8 billion debt the U.S. Postal Service endured from the 2008 recession. This may mean more emailing and less mailing letters for the typical college student in 2014.
The idea that increasing prices will be good for the economy is interesting and sounds valid. On the other hand, couldn't it be just as true that lower prices would stimulate the economy? People would be able to buy more which would give businesses more money with which they would be able to hire more people, thus stimulating the economy potentially as much but in a less painful way to the consumer.
ReplyDeleteIn reading the article, I thought that the increase home prices actually looked good for the economy. With interest rates remaining low and consumer optimism on the rise, professor George Cook predicts more buyers in the housing market. I think this could be good for the economy and would help in getting the housing market back on its feet. Also, increased equity for current homeowners could spark more consumer spending which would help business.
ReplyDeleteI think one of the other reasons for increase in prices of clothing is also due to the decline in outsourcing(accidents in Bangladesh). Most of the brands(HnM, Forever 21, GAP etc) outsource to developing countries like Bangladesh and China where the minimum wage is way less than the minimum wage in the USA thus more profitable. But due to the recent accidents, many western corporations are skeptical about outsourcing as they have to pay for all the damages that occur in working places in these countries.
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