Another fictional situation given to me involves monetary policy and the sacrifices that must be made for the better. The problem was a possible inflation that may affect the value of assets for the elderly. Angela Soracco, a fictional figure head, complains that an inflation will affect their “nest egg” that they have been building up for years to enjoy in their elder age. However, as Obama has said, “sacrifice must be shared”. Using the monetary policy, in a Keynesian perspective, will not be able to stop increasing prices, but it will be able to stop inflation. Raising interest rates will allow the aggregate demand of the economy to decrease while their is a subsequent increase. If the interest rates are set in correlation to the rising price levels, then the economy may perhaps stop the inflation from being experienced because the interest rates will be in balance with the rising price levels. This means sacrificing the younger generations with smaller “nest eggs” as their savings will not be able to accommodate the rising price.
Sacrifices must be made.
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