This essay is based on the article Inflation that is written by Robert E. Hall. The article defines inflation as the progressive increase of the general prices levels in a given economy as a result of increase in money supply in that particular economy. It also highlights the effects and causes and the solutions to the problem of inflation and the behavior of money wage rate and the political effects of public reactions to the high levels of unemployment and inflation. The notable solution to the high inflation levels highlighted by this article is the adoption of once for all fiscal reforms to an economy (Hall, 87-92). Those countries that had implemented this policy were successful in the control of the problem of inflation and the change of form of financial instruments such as mortgages ant the indexation of some forms of income.
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Some of the highlighted microeconomic policies in this article include the following: Price controls, interest ceilings, capital taxation, monetary policy, monetary standardization, excessive monetary growth rates, wage rates and the incentives of capital accumulation. This given article shows that a partially indexed economy will be seriously affected by the fluctuating levels of inflation in the economy due to the burden of adjustment that can be achieved in a non-indexed economy (McConnell & Brue 57). This article clearly outlines how the macroeconomic policies covered in this article affect the inflation rates experienced in various economies around the world. This article also highlights the effect of inflation on employment and the levels of output in a given economy.
The analysis done by Robert E. Hall in this article reinforces the concepts that we have learnt in class. The effects, causes and the solution to the various types of inflation highlighted by this article are the same principles that are in our textbooks and they are applicable in the current economy. This article has stipulated how the economy reacts to inflation and this concurs with the content in the textbooks.
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