lecture notes
... C. In 2005, conflict in the Middle East, combined with rapidly rising demand for oil in India and China, pushed oil prices above $60 per barrel (and over $70 per barrel in July 2006). U.S. inflation rose in 2005, but not core inflation (inflation rate minus price changes in food and energy). D. A nu ...
... C. In 2005, conflict in the Middle East, combined with rapidly rising demand for oil in India and China, pushed oil prices above $60 per barrel (and over $70 per barrel in July 2006). U.S. inflation rose in 2005, but not core inflation (inflation rate minus price changes in food and energy). D. A nu ...
PROBLEMS
... The Crowding out is measured as the difference between the level of income we obtain after the change in G if there was no increase in the interest rate. In practice is the level of income implied by the government expenditure multiplier in the Keynesian Cross. ∆Y=(1/1-MPC) ∆G= ∆G/1-MPC G1=50 G2=100 ...
... The Crowding out is measured as the difference between the level of income we obtain after the change in G if there was no increase in the interest rate. In practice is the level of income implied by the government expenditure multiplier in the Keynesian Cross. ∆Y=(1/1-MPC) ∆G= ∆G/1-MPC G1=50 G2=100 ...
Understanding the World Economy Final Exam – Indicative answers
... typically used in long lasting recessions (delays of implementation). These are exactly when it is the most efficient to stabilize output! And typically it can substitute monetary policy which, for long lasting recessions, can run its curse like in the last recession (zero lower bound). ...
... typically used in long lasting recessions (delays of implementation). These are exactly when it is the most efficient to stabilize output! And typically it can substitute monetary policy which, for long lasting recessions, can run its curse like in the last recession (zero lower bound). ...
Meeting the Challenge of Asia
... of the crisis, bond markets have been exposed to significant disturbances that have made the measurement of inflation expectations and the associated risks more difficult than usual. Thus, it is useful to complement this measure with expectations extracted from inflation derivatives. In particular, ...
... of the crisis, bond markets have been exposed to significant disturbances that have made the measurement of inflation expectations and the associated risks more difficult than usual. Thus, it is useful to complement this measure with expectations extracted from inflation derivatives. In particular, ...
FIXED INCOME UPDATE – FEB `17
... for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation. The fund manager(s) may or may not choose to hold the stock mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors before taking any invest ...
... for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation. The fund manager(s) may or may not choose to hold the stock mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors before taking any invest ...
6 Aggregate Supply: Wages, Prices, and Unemployment
... Supply shocks can be favorable as well as adverse: an oil price decrease or a technological improvement will both shift the aggregate supply curve outward (increase potential output). This allows us greater freedom to increase aggregate demand without driving up inflation. Another tricky problem fac ...
... Supply shocks can be favorable as well as adverse: an oil price decrease or a technological improvement will both shift the aggregate supply curve outward (increase potential output). This allows us greater freedom to increase aggregate demand without driving up inflation. Another tricky problem fac ...
Austrian Economics—The Ultimate Achievement of an Intellectual
... characteristic of inflation, he could have been clearer on this point. For example, he could have emphasized more plainly in these chapters that endogenous or market changes in the quantity of money affect relative prices because money is not neutral, as opposed to the idea that inflation is marked ...
... characteristic of inflation, he could have been clearer on this point. For example, he could have emphasized more plainly in these chapters that endogenous or market changes in the quantity of money affect relative prices because money is not neutral, as opposed to the idea that inflation is marked ...
Mankiw SM Chap13 correct size:chap13.qxd.qxd
... As time passes, the Fed learns information about the economy that was unknown to those setting wages and prices. At this point, since contracts have already set these wages and prices, people are stuck with their expectations EP. The Fed can then use monetary policy to affect the actual price level ...
... As time passes, the Fed learns information about the economy that was unknown to those setting wages and prices. At this point, since contracts have already set these wages and prices, people are stuck with their expectations EP. The Fed can then use monetary policy to affect the actual price level ...
M12_ABEL4987_7E_IM_C12
... the oldest sticky prices were set b. It takes time for prices and expected prices to adjust, so unemployment may differ from the natural rate for some time B. In touch with data and research: The Lucas critique 1. When the rules of the game change, behavior changes 2. For example, if robbers know th ...
... the oldest sticky prices were set b. It takes time for prices and expected prices to adjust, so unemployment may differ from the natural rate for some time B. In touch with data and research: The Lucas critique 1. When the rules of the game change, behavior changes 2. For example, if robbers know th ...
Real interest rate
... or businesses that have more debt than savings. A net debtor pays interest, and therefore, pays a lower real interest rate when there is unanticipated inflation. A fixed rate of interest helps a debtor in the long term. Paying back a loan with less purchasing power during times of inflation. ...
... or businesses that have more debt than savings. A net debtor pays interest, and therefore, pays a lower real interest rate when there is unanticipated inflation. A fixed rate of interest helps a debtor in the long term. Paying back a loan with less purchasing power during times of inflation. ...
Timeline of Famous Economists
... economy nears full employment the dark spectre of inflation emerges - in other words the price level starts to increase! This inflation is due to an excess level of demand and so is called demand-pull inflation . At the same time there will be increased pressure on the labour market as nearly everyo ...
... economy nears full employment the dark spectre of inflation emerges - in other words the price level starts to increase! This inflation is due to an excess level of demand and so is called demand-pull inflation . At the same time there will be increased pressure on the labour market as nearly everyo ...
PDF
... well as throughout the Western World. This has put an extraordinarily high level of demand on inputs, including ferrous scrap. The same is true of copper, zinc, aluminum, and other basic industries with the result being unprecedented world-wide price pressure on these commodities. This world-wide de ...
... well as throughout the Western World. This has put an extraordinarily high level of demand on inputs, including ferrous scrap. The same is true of copper, zinc, aluminum, and other basic industries with the result being unprecedented world-wide price pressure on these commodities. This world-wide de ...
M p E n
... Gross Domestic Product (GDP) measures the total value of goods and services produced in New Zealand over a specified period. It is also equivalent to total spending by consumers, firms, and the government, plus exports and less imports. It is often useful to think of GDP in terms of the following eq ...
... Gross Domestic Product (GDP) measures the total value of goods and services produced in New Zealand over a specified period. It is also equivalent to total spending by consumers, firms, and the government, plus exports and less imports. It is often useful to think of GDP in terms of the following eq ...
Name 1 In The General Theory of Employment, Interest, and Money
... A. falling prices redistribute income from creditors to debtors, which leads to a decline in the APC. B. falling prices redistribute income from debtors to creditors, which leads to a decline in the APC. C. a rise in the saving rate leads to a lower amount of real debt in the economy, depressing con ...
... A. falling prices redistribute income from creditors to debtors, which leads to a decline in the APC. B. falling prices redistribute income from debtors to creditors, which leads to a decline in the APC. C. a rise in the saving rate leads to a lower amount of real debt in the economy, depressing con ...
An updated post-Keynesian alternative to the New consensus on
... • Central banks tell us that they are doing a good job. But lower interest rates could have been set, without inflation rising. In other words, high rates of capacity utilization may not have the inflationary effects that central banks presume they have. ...
... • Central banks tell us that they are doing a good job. But lower interest rates could have been set, without inflation rising. In other words, high rates of capacity utilization may not have the inflationary effects that central banks presume they have. ...
1 Quantity Theory of Money
... context of our two-period general equilibrium model. Recall that the real rate of interest measures the relative price of output across time. In contrast, the nominal interest rate measures the relative price of money across time. One interpretation of the Fisher equation is that it represents a ‘No ...
... context of our two-period general equilibrium model. Recall that the real rate of interest measures the relative price of output across time. In contrast, the nominal interest rate measures the relative price of money across time. One interpretation of the Fisher equation is that it represents a ‘No ...
Deficits and Inflation - Research Showcase @ CMU
... measure of the deficit for each country. This measure, known as the public-sector borrowing requirement (PSBR), ranged from 2.0 percent of national product in France to 12.4 percent in Italy, on average, for the four years. The average inflation rate covered as wide a range. After allowing for the e ...
... measure of the deficit for each country. This measure, known as the public-sector borrowing requirement (PSBR), ranged from 2.0 percent of national product in France to 12.4 percent in Italy, on average, for the four years. The average inflation rate covered as wide a range. After allowing for the e ...
Section III. Business Cycles B. Rational Expectations Inflation
... output can only differ from potential due to unpredictable shocks. 2. Systematic monetary policy cannot impact the stability of output. Assuming no covariance between money and demand shocks, we can write the variance of the output gap as 2 d 2 2 . Note that regardless of the degree of inf ...
... output can only differ from potential due to unpredictable shocks. 2. Systematic monetary policy cannot impact the stability of output. Assuming no covariance between money and demand shocks, we can write the variance of the output gap as 2 d 2 2 . Note that regardless of the degree of inf ...
7. Demand-pull inflation
... few goods, causing the aggregate demand curve to shift up and to the right. Wages and prices are then bid up in markets. Cost-push inflation is a new phenomenon of modern industrial economies and occurs when the costs of production rise even in periods of high unemployment and idle capacity. 6. The ...
... few goods, causing the aggregate demand curve to shift up and to the right. Wages and prices are then bid up in markets. Cost-push inflation is a new phenomenon of modern industrial economies and occurs when the costs of production rise even in periods of high unemployment and idle capacity. 6. The ...
INSTITUTE OF ACTUARIES OF INDIA EXAMINATIONS 26 May 2014
... ‘Term Insurance Saver’. The price of both products is positive and a consumer's income is also positive. If the consumer's income doubles and the price of both products triple, A. The consumer's budget line gets steeper and shifts inward B. The slope of the consumer's budget line does not change but ...
... ‘Term Insurance Saver’. The price of both products is positive and a consumer's income is also positive. If the consumer's income doubles and the price of both products triple, A. The consumer's budget line gets steeper and shifts inward B. The slope of the consumer's budget line does not change but ...
Week 5 In Class CPI GDP
... b. goods and services must be selling at higher prices. c. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both. d. employment or productivity must be rising. ____ 24. The inflation rate in year 2 equals a. ...
... b. goods and services must be selling at higher prices. c. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both. d. employment or productivity must be rising. ____ 24. The inflation rate in year 2 equals a. ...
Exam Answers
... money supply every year for the next 100 years. He’s come to you for advice. Which of the following predictions is FALSE? a. Although this policy might be effective at first, eventually, it could have devastating effects because it will generate very high levels of inflation. b. As long as he increa ...
... money supply every year for the next 100 years. He’s come to you for advice. Which of the following predictions is FALSE? a. Although this policy might be effective at first, eventually, it could have devastating effects because it will generate very high levels of inflation. b. As long as he increa ...
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.