Responding to Peer Discussion Post on Minimal Inflation (Essay Sample)

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In the late 1970s and 1980s America experienced high inflation which made a consensus among many countries and states inorder to bring the inflation down by making new policies. After succeeding in their policy making aimed at downgrading the inflation rate the various American organizations and groups of people are considering to make new policies which will ensure the optimal inflation does not go below zero point. The main reason for this according to the proposed policies is to avoid the deflation rates which are being considered as more expensive. Optimal inflation can be defined as the best pace at which a currency loses its value. The inflation rates measures how prices of commodities raise at a given time. The benefits of low inflation rates include stability which enables the firms to predict the future costs and prices. Another benefit of low inflation is competitiveness which enables exports from the U.S are more competitive in the global market and have a higher consumer rates compared to other countries. The main costs associated with lowering the inflation rates include the menu costs which are associated with the changing list.
The benefits of lowering the inflation rates outweigh the costs that are associated with lowering. If reduction is done in the inflation the future profits will increase while reducing the interests rates which is good for current market. There is also benefiting of the creditors from the lowered inflation since payment adjustment that is inflated will be highe