The Effect of Inflation on Gdp

Topics: United States, Inflation, Unemployment Pages: 3 (993 words) Published: October 13, 2010
October 5, 2010
EC 351
Project Assignment #1

1. The topic I chose for my project is “What effect does the inflation rate have on the gross domestic product (GDP) of the United States of America?” I would like to study the relationship between the inflation rate and the GDP and decide whether or not the GDP mimics the inflation rate. 2. This topic is interesting and important because it affects the monetary policy of the United States of America. The inflation rate affects everything from wages to the price of a cheeseburger. The GDP is the measure of a country’s economic output. How the inflation rate affects the GDP has a significant impact on the United States’ economy. GDP and standard of living are positively correlated so if, for example, a higher inflation rate causes a lower GDP it would be in the country’s best interests to lower the inflation rate in order to increase the standard of living. It has farther reaching implications in issues such as whether or not to switch back to a gold standard in order to virtually eliminate inflation. 3. The population I am studying with this topic is the GDP of the United States economy from 1913 to today. The sample I am using is monthly and quarterly data from the fiscal years 2007-2009. The sample I used is three years out of ninety-seven years of data so it is not very representative of how inflation has affected GDP since the United States switched from the gold standard in 1913 and started measuring inflation. The years chosen are not very representative of the population because of the way the United States’ economy has grown exponentially since World War II, the Great Depression, the current recession, and any number of economic occurrences since 1913 that would affect how inflation affects the population. This is also the problem with the sample; it is not very representative of the population. I could have taken a sample from any other years from 1913 to today, but I chose the fiscal...
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