Running head: INFLATION AND ANALYSIS OF MONETARY POLICES 1

Inflation and Analysis of Monetary Polices

Pamela E. Williams

Eco/561

June 18, 2018

Jerry King
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Inflation and Analysis of Monetary Polices

This assignment is about how a product, good or service has changed in the last 20 +

years and what impact it has been on my life. There are several things that come to mind as I am

writing this paper. Gas, food and going to the hair salon. These are the products, goods and

services that impacted my life when the prices increased with them.

I bought my first car when I was nineteen years old and driving a 1978 Aspen, in the year

1990. It took a lot of gas to fill it up and it burned it quickly. But if I recall correctly it was

around 1995 when we started to see a serious raise in the cost of gas per gallon. I have often

listened to my older brothers talk about when they would go out on the town as teenagers and all

they would need each to f put gas in the car was around .50 cents because gas was only .25 cents

a gallon. And I remember thinking not in my lifetime of driving.

“Every year, gas prices continue to rise and therefore make owning a car that much more

expensive. Those who were set back an average of $2.51 per gallon last year long for the $0.16

Americans paid 80 years ago (Morin, 2016).”

“But the fact is that gas prices are intrinsically correlated with the overall economy in the

U.S. and have been for decades. Oil gluts and crisis have correlated with economic prosperity

and recessions, especially when looking through the lens of inflation.”

“No prices are more visible to the public than gasoline prices. Even for people who don’t

have to fill up a tank on a regular basis, gasoline prices are likely to be in their view, posted

every day. In addition, no prices have more of an impact on short-run movements in the

Consumer Price Index (CPI). Gasoline prices are so much more volatile than other CPI

components that, even though gasoline makes up less than 6 percent of the CPI, it is often the

main source of monthly price movements in the all items index. Moreover, because they are so
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visible, and gasoline is purchased so frequently, gasoline prices have a major impact on the

perception of prices. Constantly seeing prices at the pump creep ever higher will often create a

perception of broader inflation—and, of course, higher gasoline prices are likely to eventually

have an impact on other prices as transportation costs increase. (Crawford & Reed, 2018) “

When the gas prices started to increase steady over the last two decades, I did take notice

of how much money I needed from pay period to pay period to commute to work or just handling

everyday life. I would always budget what I thought would be enough to see me through to next

payday. One of the most important changes I made was I stopped giving people rides to work or

to the grocery store for free. If I had to pay to drive, then they had to pay to ride.

The other thing that was when purchasing a new vehicle, one of the things I consider is

“How many miles per gallon do I get in the city and on the highway?” I bought a new car two

years ago and I did purchase it based on one of the new features on some new vehicles. When

you are at a traffic light the engine shuts off and this is an energy saving feature of most new

automobiles.

The average national gasoline price for Regular is $2.898 and for Premium is 3.44 as of

June 17, 2018. For the year 1995 until this year 2018 gasoline prices have increased by $1.219

per gallon. That is a 45% increase over two decades of gasoline price increases.
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References

Crawford, M., & Reed, S. B. (2018). Measures of Gasoline Price Change. Retrieved from

http://www.bls.gov

Granger, B. (2018). Gas Prices Through History. Retrieved from http://www.titlemax.com

Morin, N. (2016). Cost of Gas the year you were born. Retrieved from http://www.thestate.com