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... 12. The rate of inflation increases. The government will benefit because: a. it is a huge creditor. b. tax revenues will increase. c. the interest that must be paid on government bonds will decline. d. productivity increases will cause economic growth to increase. ANSWER: b 13. An increase in the in ...
... 12. The rate of inflation increases. The government will benefit because: a. it is a huge creditor. b. tax revenues will increase. c. the interest that must be paid on government bonds will decline. d. productivity increases will cause economic growth to increase. ANSWER: b 13. An increase in the in ...
Macro Chapter 8 study guide questions
... b. What economic indicators would indicate where the economy is in the business cycle? Explain. c. Give the four phases of the business cycle in their order of occurrence. d. What criterion must be met for our economy to be officially in a recession? 23. Discuss the dangers of inflation; that is, wh ...
... b. What economic indicators would indicate where the economy is in the business cycle? Explain. c. Give the four phases of the business cycle in their order of occurrence. d. What criterion must be met for our economy to be officially in a recession? 23. Discuss the dangers of inflation; that is, wh ...
ECON 10020/20020 Principles of Macroeconomics
... 3. An inability to follow instructions/directions will result in points being deducted. 4. The only device allowed is a simple calculator; i.e., anything that can store or retrieve information (including a graphing calculator) is NOT allowed. 5. Use of books, notes, another person, and/or aid of any ...
... 3. An inability to follow instructions/directions will result in points being deducted. 4. The only device allowed is a simple calculator; i.e., anything that can store or retrieve information (including a graphing calculator) is NOT allowed. 5. Use of books, notes, another person, and/or aid of any ...
Economics Curriculum
... a. identify causes and effects of inflation b. construct a price index when given raw data c. calculate rate of inflation using a price index d. understand limitations of CPI as a measure of inflation e. describe and analyze how some groups are hurt while other groups benefit from unexpected inflati ...
... a. identify causes and effects of inflation b. construct a price index when given raw data c. calculate rate of inflation using a price index d. understand limitations of CPI as a measure of inflation e. describe and analyze how some groups are hurt while other groups benefit from unexpected inflati ...
Exam 3
... e. structural unemployment will start to decrease ____ 20. A zero inflation rate is not the Fed's objective because a. that would cause prices to rise b. that would cause price to fall c. it knows that it cannot attain a zero rate d. it believes that the true rate of inflation is lower than what is ...
... e. structural unemployment will start to decrease ____ 20. A zero inflation rate is not the Fed's objective because a. that would cause prices to rise b. that would cause price to fall c. it knows that it cannot attain a zero rate d. it believes that the true rate of inflation is lower than what is ...
Instructor: Prof Robert Hill Friedman and Monetarism Lewis and
... captures the fact that, other things equal, a rise in the expected rate of inflation (the average nominal capital gain on goods) reduces the demand for money. ...
... captures the fact that, other things equal, a rise in the expected rate of inflation (the average nominal capital gain on goods) reduces the demand for money. ...
mid term exam solutions
... AE describes the actual level of expenditure. Yet, the economy is in equilibrium when production (i.e., income) equals AE. That is, when Y=AE. Q2. In practice, the rate of unemployment is measured based on a survey that the BLS carries out every month. Roughly, the survey concerns household members ...
... AE describes the actual level of expenditure. Yet, the economy is in equilibrium when production (i.e., income) equals AE. That is, when Y=AE. Q2. In practice, the rate of unemployment is measured based on a survey that the BLS carries out every month. Roughly, the survey concerns household members ...
economic change and shortageflation under centrally planned
... leads clearly to the conclusion that reforms have been essentially pro-inflationary. Countries making a broader use of market instruments were faced with a rapid rise in inflation rates (measured with the consumer price index)4. The explanation is quite straightforward. Increased reliance on market- ...
... leads clearly to the conclusion that reforms have been essentially pro-inflationary. Countries making a broader use of market instruments were faced with a rapid rise in inflation rates (measured with the consumer price index)4. The explanation is quite straightforward. Increased reliance on market- ...
Unit 3 PPT
... – A high inflation rate forces firms to change prices more often than they would if the price level was more or less stable. – The changing of a listed price has a “real” cost. ...
... – A high inflation rate forces firms to change prices more often than they would if the price level was more or less stable. – The changing of a listed price has a “real” cost. ...
Review for Unit 2 Exam KEY
... For each of the following identify if it is included or excluded in the calculation of GDP. If included, state which component, and if excluded, why? a. A used economics textbook from the bookstore Excluded; used good b. New harvesting equipment for the farm Included; Investment spending (new physic ...
... For each of the following identify if it is included or excluded in the calculation of GDP. If included, state which component, and if excluded, why? a. A used economics textbook from the bookstore Excluded; used good b. New harvesting equipment for the farm Included; Investment spending (new physic ...
Principles of Macroeconomics – ECO 101
... construction and use of several macroeconomics statistics (unemployment, GDP, inflation, price indexes, monetary aggregates). The course will also devote some time to the theories that explain growth. Finally, it will close with an analysis of the workings of an open economy. We will study both the ...
... construction and use of several macroeconomics statistics (unemployment, GDP, inflation, price indexes, monetary aggregates). The course will also devote some time to the theories that explain growth. Finally, it will close with an analysis of the workings of an open economy. We will study both the ...
International Adjustment and Interdependence
... Higher price level implies lower real balances, higher interest rates, and reduced spending Given the exchange rate, our goods are more expensive to foreigners and their goods are relatively cheaper for us to buy exports decrease and imports increase ...
... Higher price level implies lower real balances, higher interest rates, and reduced spending Given the exchange rate, our goods are more expensive to foreigners and their goods are relatively cheaper for us to buy exports decrease and imports increase ...
Quantitative and Qualitative Monetary Easing (QQE)
... Negative Interest Rate" in January 2016. As a result, corporate profits, measured by the ratio of current profits to sales, have been at a record-high level. The unemployment rate has declined to as low as 3 percent. A practice of base pay rises in annual wage negotiations, which was lost during the ...
... Negative Interest Rate" in January 2016. As a result, corporate profits, measured by the ratio of current profits to sales, have been at a record-high level. The unemployment rate has declined to as low as 3 percent. A practice of base pay rises in annual wage negotiations, which was lost during the ...
represented as a natural log. Hibbs and Dennis find that this
... necessary to keep the inflation rate the same) endured for a year, lower the core inflation rate (the actual inflation rate minus food, shelter and energy), one-half of one percent. 1. The Blinder Rule is sort of a “short-term” Phillips curve: it is thought to operate over approximately a two-year p ...
... necessary to keep the inflation rate the same) endured for a year, lower the core inflation rate (the actual inflation rate minus food, shelter and energy), one-half of one percent. 1. The Blinder Rule is sort of a “short-term” Phillips curve: it is thought to operate over approximately a two-year p ...
Euro-zone Economic Outlook January 2011: A slow recovery (PDF, 38 KB)
... Euro-zone GDP growth softened in Q3 (0.3% after 1.0% in Q2), mainly due to the deceleration of world trade. Investment dropped by 0.3% while private consumption expanded modestly (+0.1%). Over the forecast horizon, the recovery of GDP in the euro-zone is expected to proceed at a similar pace (+0.4% ...
... Euro-zone GDP growth softened in Q3 (0.3% after 1.0% in Q2), mainly due to the deceleration of world trade. Investment dropped by 0.3% while private consumption expanded modestly (+0.1%). Over the forecast horizon, the recovery of GDP in the euro-zone is expected to proceed at a similar pace (+0.4% ...
Limits to Inflation Targeting
... bank and the treasury are consolidated, so that the public debt has vanished when only debt held by the central bank remains. But in the recent policy discussions it was assumed that the Fed might need to turn to holding private securities as backing for monetary reserves. That is, it was assumed th ...
... bank and the treasury are consolidated, so that the public debt has vanished when only debt held by the central bank remains. But in the recent policy discussions it was assumed that the Fed might need to turn to holding private securities as backing for monetary reserves. That is, it was assumed th ...
Government Policies: - Eg 1
... causing the cost of production to decrease because firms can now increase output with the same amount of input. This will increase AS, as the firms can now decrease price level. Goods and services become cheaper and price stability will be maintained. An increase in productivity and Aggregate Supply ...
... causing the cost of production to decrease because firms can now increase output with the same amount of input. This will increase AS, as the firms can now decrease price level. Goods and services become cheaper and price stability will be maintained. An increase in productivity and Aggregate Supply ...
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.