INFLATION IN THE UNITED STATES IN THE 1990S

INFLATION IN THE UNITED STATES IN THE 1990S

This research reviews and analyzes inflation in the United States during the 1990s. The review begins with a definition of inflation, and then discusses rates of inflation and the underlying causes of inflation in each year of the 1990s. The conclusion considers the economic impact of inflation in the 1990s.

Inflation is a process of steadily rising prices that results in a steadily diminishing purchasing power for a specified nominal amount of money. Inflation occurs where the increase in price is for a good or service for which there has occurred no substantial change in the characteristics of the good or service. Thus, an increase in the price of a potato from five-cents per pound to 10 cents per pound in a situation wherein the characteristics of the potato did not change would represent an inflationary increase in the price of potatoes. In contrast, an increase in the price of an automobile (from the same manufacturer and the same model) from $10,000 to $12,000 might not be inflationary if the automobile available at the higher price included a computerized ignition system, a computer-controlled braking system, and other technological enhancements not available on the earlier version of the automobile.

There are many measures of inflation. A well-accepted measure of inflation in the United States is the consumer price index (CPI). The CPI is available in several versions [e.g., all consumers or one of many sub-sets of consumers; and/or all goods or one of many sub-sets of goods; and not seasonally adjusted or seasonally adjusted). For this research, the CPI is used as the measure of inflation in the United States. The specific version of the CPI used in this research is the United States City Average, for items (goods), not seasonally adjusted.

Rates of Inflation and Underlying Causes in the 1990s

The first issue to consider in a discussion of rates of inflation in the 1990s is the determination of what consti…

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