Question

One of the economic measures the Federal Reserve monitors is the rate of inflation or deflation....

One of the economic measures the Federal Reserve monitors is the rate of inflation or deflation. Describe in your own words how this measure is developed. What are the long-term consequences of not managing this measure over time (both inflation & deflation)? With respect to the current administration’s objectives, what would they like the management scenario to be? What do you think will happen to our economy if the objectives are met?
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Answer #1

Inflation refers to increase in the general price level of goods and services. Prices pf general goods amd services are increased during inflation.

Deflation refers to the decrease in the general price level of goods and services. Price of general goods and services are decreased during deflation.

This measure was developed observing the consistent increase and decrease in the price level.

Long term consequences -

Decrease in GDP

it can destroy the economy

no general price will avail in the market , etc.

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