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What will inflation be in the US in 2021?
In 2020, the United States of America was hit by a disease outbreak causing many locales to issue lockdowns. These lockdowns have meant that many people have been unable to go to work, causing an increase in the unemployment rate, as well as stopping people from going to many shops.
The sudden shutdown of enormous sectors of the U.S. and global economy clearly constitute a massive short-run fall in Aggregate Supply. While Aggregate Demand is going to fall too, this time Aggregate Supply fell first... If AS [Aggregate Supply] falls a lot and AD [Aggregate Demand] falls a little, in contrast, we should expect a return of stagflation – high unemployment and high inflation simultaneously. The same holds if AS falls enormously and AD “only” falls a lot... The upshot: Though I’m not ready to bet on it, I fear that in 2021 we will see not only high unemployment but high inflation as well. (Complication: Official statistics may classify disemployed workers as “out of the labor force” because they’re too scared to hunt for a job). At this point, I would not be surprised by 10% unemployment and 6% inflation for 2021...
How bad will the inflation be?... [T]he public outcry against even high single-digit inflation will be deafening. Historically, governments have a standard response to such outcries: economy-wide price controls. Richard Nixon imposed them in 1971 when inflation was only 4.4% and restaurants were open. If and when the government does impose price controls, the textbook tells us what to expect: Ever-growing shortages, rationing, black markets, and anti-business witch-hunts.
In this question, we test one aspect of this fear:
By what percentage will the CPI increase in 2021?
The question will resolve based on CPI-U data released by the US Bureau of Labor Statistics data as of February 1st 2022. The resolution will be the percentage change of CPI-U from December 2020 to December 2021.
Other questions testing aspects of Caplan's post:
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