I believe that there are two reasons for the low inflation rate in the U.S economy. First is the low price of gasoline and other energy sources. Oil is a significant contributor to the economy. If oil prices rise, inflation should rise too. However, input costs are rising, but the cost of end products has stagnated. That results in a high producer price index (PPI), which, in turn, stagnates inflation. The second is technology. Technology has made it very easy to acquire labor, goods, and services. For instance, the Amazon app. All one needs to do is have access to the app. They can use the app to purchase whatever goods they want wherever they are in the world. Moreover, the internet has made it easy to outsource labor, lower wages, and increase job opportunities. Tats has resulted in a low consumer price index (CPI), which, in turn, results in low inflation. Inflation has continued to stagnate despite the efforts being made by the federal reserve through policies and actions. It is only through an increase in reserves that the national economic goals can be realized. Increased reserves allow commercial banks to increase their deposits, which means that they can lend more money to borrowers, putting more money into circulation. In turn, it increases wages and prices, improving employment and inflation rates. The efforts of the federal reserve have, slightly, controlled inflation. However, to fully realize the goal, the strategy used should be fully implemented, such that, instead of holding onto the reserves, they should increase the lending made by commercial banks. In this way, inflation will rise.
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