Annie Liu, Verrazzano Class of 2023, completed majors in Accounting and Business Finance
For my
capstone project I researched inflation, its impact on the economy, and how we
could protect ourselves during these periods. As a finance major, inflation was
a topic taught in many of my classes, and it was interesting to see how it
appeared to have a link to different parts of the economy.
One of the
major reasons for choosing this topic would be the current economy, as we are
currently going through a phase of inflation. One of the leading factors that
led to this inflation was the impact of the pandemic.
The federal
government has a monetary policy to lower and control inflation levels,
although it may not always be effective. The current policy is to increase the
federal funds rate to tighten the movement of money within the economy, which
is expected to succeed. I also learned about how the actions of the federal
reserve in controlling inflation could have a domino effect on the economy.
Increasing the cost of borrowing between banks will lead to more expensive
loans for businesses and individuals borrowing from the bank, in addition to
affecting the bond market.
Even though
we as individuals may not be able to control inflation, there are ways we can
protect against it. Through my research, I learned about securities like
Treasury Inflation Protected Securities (TIPS), and using gold to protect the
value of our money. Besides protection, I also learned of some ways that we could
utilize inflation to our advantage, such as buying real estate whose value has
dropped.
If I were to
continue with my research, I would look into ranking the securities from best
to worst that could be purchased in times of inflation. This research paper
allowed me to understand the objectives that I learned in class from a
real-life perspective.