With the future prospects of the Covid-19 aftermath drawing near, it is unclear how severe the consequences of the pandemic will be. It is predicted that the resurgence of consumers will lead to inflation. The lockdown measures introduced in an effort to contain the virus have significantly reduced the available supply of goods and services, which makes satisfying the needs of the consumer less manageable. During the duration of the prevention and containment period, many individuals were unable to make purchases and contribute to overall demand, but during the recovery period, such people will have the ability to purchase the commodities and necessities they desire. A clash between the reduced supply of the damaged economy and the rising demand of the public will contribute to an increase in prices, as the suppliers will struggle to recuperate their losses. The subsequent economic climate will devalue the money and lead to high inflation rates. Due to the need to address the consequences of the pandemic, the US government has released an economic stimulus, which further drove the economic supply higher, while the value of money has become more unstable.
The velocity of money, however, does not seem to be rising but steadily falling instead. This trend signifies that inflation of the economy might not occur. As explained in the article “Understanding Monetary Policy Implementation,” the fed concerns itself with regulating the balance between the supply reserve and demand, maintaining a target rate of interest. The FOMC may take action in an effort to reduce the possible harm of inflation by encouraging business lending and production as a way to further bolster the economic supply. Foreign exchange on the global market may also be used to stabilize and improve the US’s economic situation. Noted by William J. Crowder, exchange rates dictate how and when people spend their money and contribute to the ability of the population to drive demand. By allowing the flow of foreign capital at a freer pace, the government can allow its economy a more effective money circulation.