Question

1-What are the factors that cause food prices to recently increase? Do you think those prices will continue to increase in the future? Why or why not?

2- Define Macroeconomics. What do you think of the current state of the US economy is? Is it “excellent,” “good,” “fair,” or “poor”. What made them choose excellent, good, fair, or poor? Please justify your answers using data and examples from the real life

3- Define the terms inflation and deflation. What are the negative impacts each can have on an economy? What’s the inflation rate of the US in the past 5 years? Is it good or bad? Does it mean our economy is stable? Why or why not?

Answer 1

1)

Food prices are like any other goods, the prices of which are determined by the forces of demand and supply. As the population of the world increases, the demand for food grains which is a basic necessity goes on to increase. This along with the fact that a nations capacity to produce more grains is limited in the short run, leads to an increase in price of food grains.

Other reasons include cyclical decline in supply or other issues such as storms, insects etc which reduce the supply side.

Further, it is expected that the prices of food grains will only increase with time as population increases and the demand for this necessity increases and the supply increases relatively slowly.

2)

Macroeconomics is defined as the branch of economic which deals with issues which an economy faces as a whole. It focuses on aggregate or total factors which influence the growth, demand or supply or any other variable such as inflation or recession which has an impact on not one but all people within an economy respectively.

In my opinion, the current state of the United States economy is good. This is because it is one of the largest consuming as well as producing economy and is the manufacturing giant which has led to its currency being valued as global in nature and is readily accepted for payments across the globe.

Further, the country is 21 Million in terms of the GDP which is much higher than 10 countries of Asia combined. This means that the country sees large scale production and consumption which are not present in any other major economy.

The forces of demand and supply are so strong that innovation is at its very peak. Government regulations are very few and it is a market-based economy in which the consumer is the king.

The government spends adequate money on facilities such as Healthcare, Education, Nutrition etc which are the best in the world. Infrastructure and growth are also adequate and are expanding over time.

3)

Inflation refers to a general increase in the price levels in the economy. It is a situation wherein the total demand for goods and services exceeds the supply and subsequently the price of goods and services goes on increasing.

On the other hand, a recession takes place in the economy, when the prices of goods and services decreases and deflation takes place which in turn leads to negative returns and contraction in the country. This creates unemployment and insecurity in the general population.

The United States, in the past 5 years has seen an average inflation rate of under 2%. It is widely said, that this is the optimum target for a country. As an economy grows, some degree of inflation would always exist as prices would rise and profits for producers would increase over a period of time.

Economist also agree that some degree of price rise is good for the economy as it creates employment opportunities and profits for business owners rise.

Please feel free to ask your doubts in the comments section.