Essay/Term paper: Money in america

Essay, term paper, research paper:  Business

The nation's economic stability has many factors which
amount to inflation. Inflation may be caused by a number of
problems, but there are some specific examples which have
direct control over which way the prices and spending sway.
Inflation simply means that the American dollar, in this
case, is less valuable on the foreign exchange market and
the gold standard is moved to higher prices; which simply
means that more currency is needed to exchange for gold.

Any slight change in investments or a company's cost
premium could change the entire economy because of the
domino effect acting on the rest of society. For an
example, flooding in a particular region of the country
could cause inflation. In the long run, the flooding may be
catastrophic for businesses because it could cause a
shortage of products. In order for the businesses to make
up for any lost income, they must boost their prices and
make the profit margins go up. The profit margins make up
for the lost income and balance out that particular company,
but everyone else must suffer the consequences. In the
business world; the more they produce, the less they can
sell for; the less they produce, the more they sell the
product for.

Profit margins can have a direct impact on the
consumer. The more an item cost, the less a consumer will
want to purchase that particular good. Higher profit
margins may be able to balance a company's budget, but
unless their product is in very high demand, most people
will want to buy the product. The lack of people purchasing
the item may cause the company to lose money and have no
alternative other than to lay off workers. People out of
work means that less consuming will take place, meaning that
other businesses will hurt due to the lack of sales, perhaps
causing those other businesses to move up their own profit
margin, in turn creating the same cycle at a faster rate.

With businesses under, the unemployment rate would be
phenomenal. People would be seeking government assistance
while the government itself is so far in debt and tied up in
credit. The government assistance would add to the already
huge problem of the federal government spending more than it
has. The result of all the hand outs would cause an
enormous dent on the federal deficit. The deficit is
already bad enough, but in a case like this, the government
would try to do something to prevent a long recession.

The Federal Reserve bank tries to balance the economy
out by influencing other banks to print up more money to
make up for the losses. This may stop the ship from sinking
all the way, but this decreases the value of the dollar
because of the excessive amount of money in circulation.
The dollar is less valuable on our own market, so prices
rise. The dollar is also less valuable on the foreign
market which means that it takes more money to equal a yen,
mark, or pound. Also, the value of an ounce of gold is
worth less due to the gold standard, which lets gold be
redeemed for dollars. Inflation has occurred and value of
the dollar has decreased. If most people wouldn't panic and
just stay calm, less stress would be spread, making the
entire economic industry a safer and easier thing to live
with.