Auto Industry

Inflation is an economic word which is considered to be a familiar word used by the media (www.bos.frb.org ). According to economists, high inflation can have an unfavorable affect on the economy, while less extreme levels of inflation can cause inaccurate investment and consumption decisions (www.bos.frb.org ). Inflation is the continual rise in the price level. One of the concerns of individuals is that the continuous rise in prices could lower the quality of living if incomes do not continue to rise. The rising of the price index can cause distrust by the people toward the government. For example inflation can be unexpected and when it occurs it causes more money to be taken from ones income therefore reducing the standard of living. Inflation affects people and businesses differently. The people are more concerned about how much their income is affected. Chances are consumers will not have the desire to acquire new debt such as purchasing a new vehicle if there quality of life is affected by inflation. This would definitely put a damper on the automotive industry because they need that business in order to thrive in the industry.

Inflation also affects the employment status of an individual and also the production of businesses. For example the cost of oil increased in the 1970’s. The high inflation on oil affected many businesses that used this resource to fuel machines used by their employees (www.bos.frb.org ). This would cause the productivity of the company to decrease and also reducing the number of employees to compensate for the inflation. It seems that inflation does more harm than good. Inflation causes the unemployment rate to increase in this case. The unemployment rate is the percentage of people in the economy that are willing and able to work but are not working.

Not all businesses are negatively affected by high inflation rates. In the 1970’s, real estate buying was increasing due to the rising of inflation. The interest rates on real estate...