Instructions: Review and respond to at least two of your classmates' posts by sharing any ideas you may have about how households and businesses can protect themselves against inflation.
Please help with a response to the following:
The government tries to restrain inflation because it causes an unintended and undesirable redistribution of income and wealth (Amacher, Pate 2012). That is when a lender who is in the driver's seat when providing a loan to a person can charge a low-interest rate to entice people to borrow money at that low rate. Now if the Feds were to raise the interest rate even a quarter of a percent this could turn the tables from the lender over to the borrower. In the first scenario, the Lender will make a small profit over the long term with the low-interest rates. If the nation's interest rate increases, the value of the dollar goes down and the Lender ends up making less back than they loaned. This causes the redistribution of the income to favor the borrower.
Once inflation starts to happen it is a trickle-down effect on the consumer in the long run. Eventually, the consumer will start to pay inflated rates in some way through the goods and services they purchase. Those that are on fixed incomes will be adversely affected because as their income does not increase but the cost of goods does, they will have to find ways to cut their spending in order to make ends meet. This could be done without eating out as often, buying cheaper and fewer quality foods, or shopping at lower quality stores just to save the extra dollars that inflation has cost them. People who are on fixed incomes have to become more creative in order to still enjoy some qualities in life when times get tight.
Instructions: Review and respond to at least two of your classmates' posts by sharing any ideas you may have about how households and businesses can protect themselves against inflation.
Please help with a response to the following:
The government tries to restrain inflation because it causes an unintended and undesirable redistribution of income and wealth (Amacher, Pate 2012). That is when a lender who is in the driver's seat when providing a loan to a person can charge a low-interest rate to entice people to borrow money at that low rate. Now if the Feds were to raise the interest rate even a quarter of a percent this could turn the tables from the lender over to the borrower. In the first scenario, the Lender will make a small profit over the long term with the low-interest rates. If the nation's interest rate increases, the value of the dollar goes down and the Lender ends up making less back than they loaned. This causes the redistribution of the income to favor the borrower.
Once inflation starts to happen it is a trickle-down effect on the consumer in the long run. Eventually, the consumer will start to pay inflated rates in some way through the goods and services they purchase. Those that are on fixed incomes will be adversely affected because as their income does not increase but the cost of goods does, they will have to find ways to cut their spending in order to make ends meet. This could be done without eating out as often, buying cheaper and fewer quality foods, or shopping at lower quality stores just to save the extra dollars that inflation has cost them. People who are on fixed incomes have to become more creative in order to still enjoy some qualities in life when times get tight.
