maximize our economic growth while keeping inflation as minimal as possible. They do this by increasing and decreasing interest rates. Although, Economists and the Federal Reserve abide by the Phillips Curve as a general rule for not letting inflation get out of hand, it has been proven many times in the past that it is possible to have a very healthy and prosperous economy without raising inflation at all. There are even examples of inflation declining while the economy booms. As Steve Forbes, of Forbes magazine, said, “Prosperity is not the fueler of inflation.” For example, in the 1980's, when the economy was at a major high, inflation fell from 13% all the way to 4%. That’s an incredible drop for such a short period of time. Another good demonstration of a healthy economy with low secondary effects of inflation is time period between the Korean Vietnam Wars. During this time the countries economy expanded at an annual average of 3.5% while the inflation rate stayed at a minimal amount. Our central bank, along with the Clinton Administrations and many other major economists seem to believe that any kind of growth in the economy of over 2.5% will trigger inflation. That’s why so many economists assumed that with the ever-lowering unemployment rates of recent, there would be huge increases in wages and it would sharply inflate prices. This same assumption was made because of the Federal Reserve’s actions in the past. In 1994 the Federal Reserve tried slowing down the economy in the fight against inflation by raising interest rates. They were not thinking of the opportunity costs of a million new jobs that could have been created, but were not, due to the economies slumping standards. Because of this, many personal incomes that could have been increased were not. This is just one example of market failure through the ideas of Phillips Curve and the Consumer Price Indexes. As I stated earlier, the Consumer...
