The Effect of Inflation on the Consumer and Money Markets Research Paper - 2

The Effect of Inflation on the Consumer and Money Markets - Research Paper Example The federal government realizes the impact inflation has on the elderly and in their social security system there is a safeguard protocol that protects the beneficiaries. The payments of social security are adjusted each year to offset the effects of inflation.   Another reason the elderly are affected a lot by inflation is that the elderly spend a lot of money on medical expenses. The inflation rate in the medical field is approximately 10%. The inflation varies by goods and industries. When inflation occurs in food prices the lower class is affected the most because poor people have limited income to pay to its food necessities. The amount of inflation in an economy depends on the country. In the United States, the inflation rate as of February 2011 was 2.1% (Tradingeconomics). Historically the United States has always had a low inflation rate. There are parts countries in this world that have been completely destabilized by the effects of inflation. A phenomenon in economics known as hyperinflation can destroy an economic system. Hyperinflation can be defined as extreme or excessive inflation. A country that is currently going through a hyperinflation crisis in Zimbabwe. Two other countries that have suffered from hyperinflation in the past are Argentina and Russia. In the past, the cost of living was much lower. We have heard stories about how our grandparents used to pay a few pennies for a can of coke or a pound of bread. Through the passage of time, things have gotten much more expensive. Despite lower wages, our ancestors had great wealth because they could buy more goods and services with less money. During those years owning land and homes was more accessible because prices were much lower. When inflation goes up in the United States the Federal Reserve can take measures to control inflation. This is called monetary policies. The current chairman of the FED is Ben Bernanke. Inflation is an economic variable that affects the lives of everyone. When inflation is low people enjoy a better standard of living in the long run because their money is not getting diluted due to inflation. In the United States, inflation is currently low at around 2%.