Economic Growth Across the United States Over Term Paper

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economic growth across the United States over the last few months and the inflation concerns stemming from the energy sector. The overall increase in consumer price index, which is the general measure of the inflation rate, is more than balanced by the increase in the income levels for the period. The increase is consumer prices between April and May (.5% increase) created fears of inflation. This steep increase however is not an accurate appraisal because it reflected the temporary surge in oil prices during that month. In general energy and food components are considered to be volatile and therefore price hikes of these products will normalize within a short period of time. Oil prices have since dropped down and by the end of June they were stabilized at close to normal levels. However, any sustained increase in energy costs would have drastic effects on the prices of consumer goods and increase the inflation. The core consumer expenditure index which does not include energy and food components was changed by a very little margin of.2% compared to the previous 2 months indicating economic stability.

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(Absence of serious inflation) Also, the average increase in consumer price index by 1.6% for the period of June 2003 to May 2004 is considered quiet normal.

Supply, demand and price are inter-related factors and the cyclical nature of the economy implies that changes are inevitable though controllable in any economy. As a general rule the increase in purchasing power results in greater aggregate demand. Industries must augment their production capacities to level off the increase in demands. If production does not match the requirements the end result is an increase in prices or in other words lowering of money value. (Inflation) In any economic cycle this fluctuation in demand and supply is unavoidable and inflation becomes part of it. The decreasing unemployment rates in America are indicative of a vibrant economy with consequent increase in demand for consumer and capital goods. Any surge in economic activity results in the inflationary risks. Inflation factor is a concern for a growing economy and is reflected as an increase in the Consumer price index. For the present period economists….....

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