Article Review: Macroeconomics (Article Critique Sample)

Article Review
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Summary
The article addresses a new approach to U.S. economic policy; creating a hot or high-pressure economy. Allowing the economy to run hot implies risking a bit of inflation in the short term to achieve the long-term conditions of low unemployment and a strong economy. Irwin (2021) posits that President Biden and the Federal Reserve have embraced this approach through the use of aggressive monetary and fiscal policy, as manifested by the near-zero interest rates and trillions of dollars in federal spending.
However, creating a high-pressure economy has its downsides. While the economic model has created abundant job opportunities, rising wages for low-paid workers, and a faster post-pandemic recovery relative to the previous recessions, it has caused prices to rise faster than average wages. Thus, the purchasing power of American workers’ paychecks has fallen. Although the rising inflation is partly attributable to supply shortages, it could also be demand-driven, potentially spurred by COVID-19 stimulus checks and low-interest loans. Thus, even though a high-pressure economy has positive labor market effects, the government must be keen on the pressure created to prevent inflation from rising too high and eating away the gains made in employment and wages.
Reaction
I agree with the author’s opinion that an elevated effort by the government on employment creation and wage rises can be counterproductive. As depicted by the Phillip’s Curve, Inflation and unemployment are inversely correlated; as the rate of unemployment decreases, inflation increases. As the demand for labor increases, employers increase wages to a