The Short-Run Phillips Curve
... between unemployment and inflation that arise as shifts in the aggregate demand curve move the economy along the short-run aggregate supply curve. • The greater the aggregate demand for goods and services, the greater is the economy’s output, and the higher is the overall price level. • A higher lev ...
... between unemployment and inflation that arise as shifts in the aggregate demand curve move the economy along the short-run aggregate supply curve. • The greater the aggregate demand for goods and services, the greater is the economy’s output, and the higher is the overall price level. • A higher lev ...
Week 8 Practice Quiz a Answers
... shifts right when real money supply (M/P) increases (or changes in inflation expectations – but we have not focused on that). M/P increases only when M increases or P falls. I told you in the question stem to assume that P is fixed (unless told otherwise). So, basically, the only true answer would b ...
... shifts right when real money supply (M/P) increases (or changes in inflation expectations – but we have not focused on that). M/P increases only when M increases or P falls. I told you in the question stem to assume that P is fixed (unless told otherwise). So, basically, the only true answer would b ...
IOSR Journal of Business and Management (IOSRJBM)
... It must be noted however, that the causes of inflation goes beyond monetary causes. In Nigeria, weatherinduced variations in food supplies have without doubt been a major non-monetary factor in the movement of the price level (Odozi, 1992). The relatively large and persistent Naira depreciation in t ...
... It must be noted however, that the causes of inflation goes beyond monetary causes. In Nigeria, weatherinduced variations in food supplies have without doubt been a major non-monetary factor in the movement of the price level (Odozi, 1992). The relatively large and persistent Naira depreciation in t ...
CHAPTER - 7 STAGFLATION
... A large number of workers are forced to remain jobless both in rural and urban areas is true beyond dispute, but we do not possess ...
... A large number of workers are forced to remain jobless both in rural and urban areas is true beyond dispute, but we do not possess ...
The Quantity Theory of Money in a Developing Economy: Empirical
... well. Implying, an increase in interest rate vis-à-vis money demand, plus a direct relation between anticipated inflation and money demand. In contrast, all coefficients are statistically significant, except for the real interest rate. This could be explained by the dominance of the open market oper ...
... well. Implying, an increase in interest rate vis-à-vis money demand, plus a direct relation between anticipated inflation and money demand. In contrast, all coefficients are statistically significant, except for the real interest rate. This could be explained by the dominance of the open market oper ...
Central Banks
... objective was to devalue the USD in terms of gold and other currencies without abandoning the gold standard. The Order effectively disconnected the market for monetary gold from the market for gold as a commodity. It required all persons to deliver on or before May 1, 1933, all but a small amount of ...
... objective was to devalue the USD in terms of gold and other currencies without abandoning the gold standard. The Order effectively disconnected the market for monetary gold from the market for gold as a commodity. It required all persons to deliver on or before May 1, 1933, all but a small amount of ...
Chapter 12 Appendix A
... In Figure 12A2.4, we look at a permanent negative supply shock. In this case, in panel (c) the long-run supply curve shifts leftward from LRAS1 to LRAS2, while the short-run aggregate supply curve shifts up from AS1 to AS2. However, again neither the MP or IS curves shift in panels (a) or (b). When ...
... In Figure 12A2.4, we look at a permanent negative supply shock. In this case, in panel (c) the long-run supply curve shifts leftward from LRAS1 to LRAS2, while the short-run aggregate supply curve shifts up from AS1 to AS2. However, again neither the MP or IS curves shift in panels (a) or (b). When ...
NBER WORKING PAPER SERIES THE ROLE FOR DISCRETIONARY FISCAL POLICY Martin Feldstein
... Ahearne et. al. (2002) acknowledge that excessively easy money may cause an overshooting of asset prices and exchange rates. ...
... Ahearne et. al. (2002) acknowledge that excessively easy money may cause an overshooting of asset prices and exchange rates. ...
This PDF is a selection from a published volume from... Economic Research Volume Title: NBER International Seminar on Macroeconom
... effectiveness, the dangers of deflation, and the resulting rationale for quantitative easing were laid out and analyzed in Orphanides and Wieland (1998, 2000) and Coenen and Wieland (2003, 2004). As long as savers have the option to choose cash—a zero‐interest‐bearing asset—as a store of value, a ra ...
... effectiveness, the dangers of deflation, and the resulting rationale for quantitative easing were laid out and analyzed in Orphanides and Wieland (1998, 2000) and Coenen and Wieland (2003, 2004). As long as savers have the option to choose cash—a zero‐interest‐bearing asset—as a store of value, a ra ...
Tut 9
... spend more, so there’s a larger quantity of goods and services demanded (Pigou’s wealth effect); (2) a lower price level reduces the interest rate, encouraging greater spending on investment, so there’s a larger quantity of goods and services demanded (Keynes’s interest-rate effect); (3) a fall in t ...
... spend more, so there’s a larger quantity of goods and services demanded (Pigou’s wealth effect); (2) a lower price level reduces the interest rate, encouraging greater spending on investment, so there’s a larger quantity of goods and services demanded (Keynes’s interest-rate effect); (3) a fall in t ...
aggregate-demand curve
... level boosts investment spending by businesses • The Exchange-Rate Effect: a lower price level boosts net exports ...
... level boosts investment spending by businesses • The Exchange-Rate Effect: a lower price level boosts net exports ...
A rise in the price of oil imports has resulted in a decrease of short
... 8. What is it that gives paper currency its value? a. It is backed by gold. b. It is so useful an item. c. The knowledge that all societies in history have used paper currency. d. That people believe it has value. 9. If the Federal Reserve Board wants to increase the money supply, they will: a. Buy ...
... 8. What is it that gives paper currency its value? a. It is backed by gold. b. It is so useful an item. c. The knowledge that all societies in history have used paper currency. d. That people believe it has value. 9. If the Federal Reserve Board wants to increase the money supply, they will: a. Buy ...
The Tools of Monetary Policy
... This equation shows that the proportionate change in the price level equals the proportionate change in the quantity of money. This gives us the quantity theory of money: In the long run, the percentage increase in the price level equals the percentage increase in the quantity of money. ...
... This equation shows that the proportionate change in the price level equals the proportionate change in the quantity of money. This gives us the quantity theory of money: In the long run, the percentage increase in the price level equals the percentage increase in the quantity of money. ...
Chap31
... If aggregate demand is higher than expected, at AD', the economy in the short run will be at point b in both panels. If aggregate demand is lower than expected, at AD*, short-run equilibrium will be at point c, the price level (101) will be lower than expected, and output will be below the potential ...
... If aggregate demand is higher than expected, at AD', the economy in the short run will be at point b in both panels. If aggregate demand is lower than expected, at AD*, short-run equilibrium will be at point c, the price level (101) will be lower than expected, and output will be below the potential ...
Inflation
... the future behavior of an economic variable using economic models. – Backward-looking Expectations use only information on the past behavior of economic variables. – Adaptive Expectations base expectations for next period’s values on an average of actual values during previous periods. Copyright © 2 ...
... the future behavior of an economic variable using economic models. – Backward-looking Expectations use only information on the past behavior of economic variables. – Adaptive Expectations base expectations for next period’s values on an average of actual values during previous periods. Copyright © 2 ...
Ch 2: C 1-8
... The GDP-deflator is a price index that covers the average price increase of all final goods and services currently produced within an economy. It is defined as the ratio of nominal GDP to real GDP. Nominal GDP is measured in current dollars, while real GDP is measured in socalled base-year dollars. ...
... The GDP-deflator is a price index that covers the average price increase of all final goods and services currently produced within an economy. It is defined as the ratio of nominal GDP to real GDP. Nominal GDP is measured in current dollars, while real GDP is measured in socalled base-year dollars. ...
del01-Gros 221119 en
... Eastern Europe has shown that there are indeed great differences in the ability of different countries to raise taxes. In Russia, to take an extreme example, until recently, the government was not even able to raise 15 % of GDP, whereas in Estonia government revenues amount to over 30 % of GDP1. At ...
... Eastern Europe has shown that there are indeed great differences in the ability of different countries to raise taxes. In Russia, to take an extreme example, until recently, the government was not even able to raise 15 % of GDP, whereas in Estonia government revenues amount to over 30 % of GDP1. At ...
Domestic Origins of the Monetary Approach to the Balance of
... pace and real income falls below normal, many workers prefer leisure at this real rate of pay. As a result, the recorded unemployment rate rises above the natural rate and the rate of growth in real output falls below the long-run average. The economy loses on the downturn what it gained on the uptu ...
... pace and real income falls below normal, many workers prefer leisure at this real rate of pay. As a result, the recorded unemployment rate rises above the natural rate and the rate of growth in real output falls below the long-run average. The economy loses on the downturn what it gained on the uptu ...
NBER WORKING PAPER SERIES THE INEXORABLE AND MYSTERIOUS TRADEOFF N. Gregory Mankiw
... produces a stable downward-sloping Phillips curve. Nor do I mean that any particular regression ...
... produces a stable downward-sloping Phillips curve. Nor do I mean that any particular regression ...
Inflation
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the consumer price index) over time. The opposite of inflation is deflation.Inflation affects an economy in various ways, both positive and negative. Negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future.Inflation also has positive effects: Fundamentally, inflation gives everyone an incentive to spend and invest, because if they don't, their money will be worth less in the future. This increase in spending and investment can benefit the economy. However it may also lead to sub-optimal use of resources. Inflation reduces the real burden of debt, both public and private. If you have a fixed-rate mortgage on your house, your salary is likely to increase over time due to wage inflation, but your mortgage payment will stay the same. Over time, your mortgage payment will become a smaller percentage of your earnings, which means that you will have more money to spend. Inflation keeps nominal interest rates above zero, so that central banks can reduce interest rates, when necessary, to stimulate the economy. Inflation reduces unemployment to the extent that unemployment is caused by nominal wage rigidity. When demand for labor falls but nominal wages do not, as typically occurs during a recession, the supply and demand for labor cannot reach equilibrium, and unemployment results. By reducing the real value of a given nominal wage, inflation increases the demand for labor, and therefore reduces unemployment.Economists generally believe that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. However, money supply growth does not necessarily cause inflation. Some economists maintain that under the conditions of a liquidity trap, large monetary injections are like ""pushing on a string"". Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.Today, most economists favor a low and steady rate of inflation. Low (as opposed to zero or negative) inflation reduces the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reduces the risk that a liquidity trap prevents monetary policy from stabilizing the economy. The task of keeping the rate of inflation low and stable is usually given to monetary authorities. Generally, these monetary authorities are the central banks that control monetary policy through the setting of interest rates, through open market operations, and through the setting of banking reserve requirements.