Inflation Targeting and the Relationship with Wealth
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Inflation is targeted on a near zero basis by the Federal Reserve. Inflation targeting is meant to keep inflation from ruining the stability of the economy. However, a low target inflation rate disallows for a more elastic change in inflation based on economic issues. Using the Keynesian phillips curve, the inverse relationship of inflation and unemployment is tested through other wealth variables to see if the change in inflation has impacted that growth and development of wealth inequities. The paper seeks to question inflation targeting as a practice and relate inflation targeting with wealth inequity data from 1979-2012. Through the data analysis, no conclusion can be made about the direct relationship between inflation and the growth or no growth of inequality. Although the question is not answered per se, it begins the questioning of whether there are other better ways for the government to intervene in the economy.