Inflation & Deflation: The Issue Term Paper

The Federal Reserve should be able to control and measure the demand and supply on the market and correlate the two indexes. Also, and probably most importantly, the Reserve should constantly supervise and regulate the monetary system, assuring correspondence between the amount of money in coins and bills on the market and their coverage in gold and in the total quantity of goods and services produced.

The economic practice has concluded that a common and rather successful technique in diminishing the negative effects of inflation is to deliberately induce deflation and vice-versa.

However, applying these techniques into the economic and social system raises several difficulties for the Federal Reserve. These difficulties generally reside in economic and social factors. The economic factor is represented by the continuously changing and evolving production technologies, increasing demands, cost and revenues which are almost impossible to foresee or control. Moreover, the social factor of the Federal Reserve's difficulties implies the mistrust the large public has towards the organization. Along the years, the Reserve was severely criticized for the content and nature of their acts and decisions, and also for the fact that most of their decisions were taken behind closed doors, regardless of the public's opinion and in secrecy.Bibliography

Lipsey, Richard G., Chrystal, Alec K., Possitive Economy, Chapter 10: Inflation, Published by Weidenfeld & Nicolson in September 1989

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Inflation Data, What is Deflation, 2004

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Inflation Data, What is Deflation, 2004

Wikipedia, The….....