Price Stability and the Long-Run Target for
... downwardly rigid. If nominal wages are rigid and the inflation rate is low, real wages (that is, wages relative to prices) may decline only very slowly following a decrease in the demand for labour. In the simple textbook model, the less real wages adjust, the more employment will decline with the d ...
... downwardly rigid. If nominal wages are rigid and the inflation rate is low, real wages (that is, wages relative to prices) may decline only very slowly following a decrease in the demand for labour. In the simple textbook model, the less real wages adjust, the more employment will decline with the d ...
Second Midterm Monday/Wednesday Lecture
... equilibrium level of output and equilibrium price level if OPEC reduces the amount of oil produced this year effectively reducing the supply of gas this year. The reduction in the supply of gas pushes up gas prices and shifts the short-run aggregate supply curve up. As the short-run aggregate supply ...
... equilibrium level of output and equilibrium price level if OPEC reduces the amount of oil produced this year effectively reducing the supply of gas this year. The reduction in the supply of gas pushes up gas prices and shifts the short-run aggregate supply curve up. As the short-run aggregate supply ...
Aggregate Supply and Aggregate Demand
... the price level, respectively that workers temporarily misinterpret movement of real and nominal wages. Therefore, sometimes it is also called equilibrium model with imperfect information (i.e. fooling model). Characteristics of the model. In the model it is assumed that (similarly Keynesian model) ...
... the price level, respectively that workers temporarily misinterpret movement of real and nominal wages. Therefore, sometimes it is also called equilibrium model with imperfect information (i.e. fooling model). Characteristics of the model. In the model it is assumed that (similarly Keynesian model) ...
Inflation October 18
... throughout the economy. This type of inflation is often described as costpush inflation. Increases in costs push prices up. The most common recent examples are inflationary periods caused largely by increases in the price of oil. Or if employers and employees begin to expect inflation, costs and pri ...
... throughout the economy. This type of inflation is often described as costpush inflation. Increases in costs push prices up. The most common recent examples are inflationary periods caused largely by increases in the price of oil. Or if employers and employees begin to expect inflation, costs and pri ...
Money Growth and Inflation
... THE CLASSICAL THEORY OF INFLATION • Inflation: Historical Aspects • Over the past 60 years, prices have risen on average about 4 percent per year. • Deflation, meaning decreasing average prices, occurred in the U.S. in the nineteenth century. • Hyperinflation refers to high rates of inflation such ...
... THE CLASSICAL THEORY OF INFLATION • Inflation: Historical Aspects • Over the past 60 years, prices have risen on average about 4 percent per year. • Deflation, meaning decreasing average prices, occurred in the U.S. in the nineteenth century. • Hyperinflation refers to high rates of inflation such ...
long-run aggregate supply curve
... stay there unless there are changes in the behavior of suppliers, households, firms, governments or the foreign sector. • If an economy is not in short-run equilibrium, the forces of aggregate demand and aggregate supply will cause the economy to move to equilibrium. ...
... stay there unless there are changes in the behavior of suppliers, households, firms, governments or the foreign sector. • If an economy is not in short-run equilibrium, the forces of aggregate demand and aggregate supply will cause the economy to move to equilibrium. ...
Relationship between Inflation and Economic Growth in
... have a higher propensity to save. The increase in savings increase the supply of investible funds and lowers the interest rates which stimulates investment as well as economic growth The concept of Phillips curve also hypothesizes that high inflation positively affects the economic growth by contrib ...
... have a higher propensity to save. The increase in savings increase the supply of investible funds and lowers the interest rates which stimulates investment as well as economic growth The concept of Phillips curve also hypothesizes that high inflation positively affects the economic growth by contrib ...
14.02 Quiz 1 Solution
... 4. Fiscal policy cannot affect the level of GDP if money demand does not depend on the interest rate Solution. True: when money demand does not depend on the interest rate, the LM curve is vertical, meaning that output is set on the financial market, no matter what the conditions on the goods marke ...
... 4. Fiscal policy cannot affect the level of GDP if money demand does not depend on the interest rate Solution. True: when money demand does not depend on the interest rate, the LM curve is vertical, meaning that output is set on the financial market, no matter what the conditions on the goods marke ...
How effective are programmes for the unemployed?
... the group of people eligible for it, might have an indirect effect on other groups (people from other age groups or young short-term unemployed). First of all employment of people eligible for the programme might take place at the expense of other unemployed. For example, employers in their hiring d ...
... the group of people eligible for it, might have an indirect effect on other groups (people from other age groups or young short-term unemployed). First of all employment of people eligible for the programme might take place at the expense of other unemployed. For example, employers in their hiring d ...
Page 1
... policy may create inflation because it over stimulates the economy . This problem has led some economists to recommend policy rules . Examples of policy rules are that money supply should grow at 5 percent a year and nominal GDP should grow at 6 percent a year . Ther’s a second reason why understand ...
... policy may create inflation because it over stimulates the economy . This problem has led some economists to recommend policy rules . Examples of policy rules are that money supply should grow at 5 percent a year and nominal GDP should grow at 6 percent a year . Ther’s a second reason why understand ...
1999 South-Western College Publishing
... is undermined because of people’s anticipation of consequences ©1999 South-Western College Publishing ...
... is undermined because of people’s anticipation of consequences ©1999 South-Western College Publishing ...
Ogbokor. Is Namibia`s inflation import driven
... Inflation is a complex process and it is very difficult to construct an empirical model for a country. However it is possible to find the key variables impacting the inflation process in a country like Namibia. On the basis of the monetarists’ argument that inflation is always and everywhere a monet ...
... Inflation is a complex process and it is very difficult to construct an empirical model for a country. However it is possible to find the key variables impacting the inflation process in a country like Namibia. On the basis of the monetarists’ argument that inflation is always and everywhere a monet ...
Economic Policy in the Open Economy Under Fixed Exchange Rates
... internal and external imbalances: – Case I: BOP deficit; unacceptably rapid ...
... internal and external imbalances: – Case I: BOP deficit; unacceptably rapid ...
Frictional unemployment
... inflation rates. More scientifically, this rate is sometimes referred to as the NAIRU or the NonAccelerating Inflation Rate of Unemployment No matter what its name, this means that if the unemployment rate gets "too low," inflation will get worse and worse (accelerate) in the absence of wage and pri ...
... inflation rates. More scientifically, this rate is sometimes referred to as the NAIRU or the NonAccelerating Inflation Rate of Unemployment No matter what its name, this means that if the unemployment rate gets "too low," inflation will get worse and worse (accelerate) in the absence of wage and pri ...
Macro Handout 19: Inflation Targeting and
... Has an effect only on the ____________ rate. When the Fed targets it remains at 2.0 percent; when the Fed does not target it rises from 2.0 to _____ percent. ...
... Has an effect only on the ____________ rate. When the Fed targets it remains at 2.0 percent; when the Fed does not target it rises from 2.0 to _____ percent. ...
Macroeconomics Unit 4
... The price level has a positive effect on aggregate supply as it induces increases in production. ...
... The price level has a positive effect on aggregate supply as it induces increases in production. ...
Determinants of Inflation in Nigeria: An Empirical Analysis
... The maintenance of price stability is one of the macroeconomic challenges facing the Nigerian government in our economic history. This elusive factor is known and referred to as inflation in our economic history and this is defined by economists as a continuous rise in prices. By definition, inflati ...
... The maintenance of price stability is one of the macroeconomic challenges facing the Nigerian government in our economic history. This elusive factor is known and referred to as inflation in our economic history and this is defined by economists as a continuous rise in prices. By definition, inflati ...
Money and Inflation
... When this happens, the logical thing to do is to cut the real wage from (W /P) 1 to (W /P) 2 If prices are fixed, this implies a reduction in nominal wages However, this is hardly done in practice because workers feel offended. ...
... When this happens, the logical thing to do is to cut the real wage from (W /P) 1 to (W /P) 2 If prices are fixed, this implies a reduction in nominal wages However, this is hardly done in practice because workers feel offended. ...
The Relationship between Output and Unemployment with Efficiency Wages
... problems than they solve. Experience in many countries suggests that the latter reservation is not trivial." In this paper we focus on one such case by examining the relationship between the level of output and the rate of unemployment. The common belief regarding this relationship is dominated by O ...
... problems than they solve. Experience in many countries suggests that the latter reservation is not trivial." In this paper we focus on one such case by examining the relationship between the level of output and the rate of unemployment. The common belief regarding this relationship is dominated by O ...
Phillips curve
In economics, the Phillips curve is a historical inverse relationship between rates of unemployment and corresponding rates of inflation that result in an economy. Stated simply, decreased unemployment, (i.e., increased levels of employment) in an economy will correlate with higher rates of inflation.While there is a short run tradeoff between unemployment and inflation, it has not been observed in the long run. In 1968, Milton Friedman asserted that the Phillips Curve was only applicable in the short-run and that in the long-run, inflationary policies will not decrease unemployment. Friedman then correctly predicted that, in the upcoming years after 1968, both inflation and unemployment would increase. The long-run Phillips Curve is now seen as a vertical line at the natural rate of unemployment, where the rate of inflation has no effect on unemployment. Accordingly, the Phillips curve is now seen as too simplistic, with the unemployment rate supplanted by more accurate predictors of inflation based on velocity of money supply measures such as the MZM (""money zero maturity"") velocity, which is affected by unemployment in the short but not the long term.