A study on Fighting against Inflation

Abstract

For policymakers, keep prices stable is a persistent goal to pursue. This article firstly investigates the background of inflation, its history, causes and costs are included. Then gives recommendations for U.S. to combat inflation without recession. For monetary policies, rising federal funds rate and Reverse Repurchase Agreement are the contractionary tools to decrease inflation rate in the short run. For fiscal policies, decreasing business tax and stimulating the labor market are supply-side policies that can be used to promote economic growth in the long run. Moreover, we examine the effect on labor market particularly. Based on these anaylsis, we conclude that the most efficient method is to combine the four monetary and fiscal policies.