America vs Inflation
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Nicholas Lalla
CoPIs:
Anthony Calucci , Kenneth Patrick , Santino Rao
College:
College of Business and Public Management
Major:
Finance
Faculty Research Advisor(s):
Bo Wang
Abstract:
This project aims to explore the strategies employed by the Federal Reserve (the Fed) to manage inflationary pressures within the economy and elucidate the resultant challenges faced by corporations during periods of heightened inflation. Inflation, the sustained increase in the general price level of goods and services, poses significant economic risks and disrupts market dynamics. As the primary monetary authority in the United States, the Fed plays a crucial role in regulating inflation through various policy tools and interventions.
The project begins by analyzing the mechanisms through which the Fed influences inflation, including its control over interest rates, open market operations, and regulatory policies. By adjusting the federal funds rate and engaging in quantitative easing or tightening measures, the Fed seeks to stabilize prices and maintain economic stability. Furthermore, the project investigates the historical context of inflationary episodes and evaluates the efficacy of the Fed's responses in mitigating inflationary pressures.
Moreover, the project delves into the repercussions of high inflation on corporations, elucidating the adverse effects on their operations, profitability, and strategic decision-making processes. High inflation erodes purchasing power, increases input costs, and disrupts supply chains, thereby diminishing corporate earnings and shareholder value. Additionally, inflationary uncertainty can hamper long-term investment planning, exacerbate financial volatility, and erode consumer confidence, further exacerbating challenges for corporations across various sectors.
Through a comprehensive examination of empirical data, economic theories, and case studies, this project seeks to provide insights into the intricate relationship between the Fed's inflation control measures and the challenges faced by corporations. By understanding the dynamics of inflation management and its implications for corporate entities, policymakers, economists, and business leaders can formulate informed strategies to navigate and mitigate the adverse effects of inflationary pressures on the economy.