Asset Price Volatility and Monetary Policy
... side effects of monetary policy that focuses on the stock market. It follows that any strategy aimed at asset price volatility must recognize the central bank’s relative ignorance about (i) what true fundamental asset prices should be and (ii) how psychology will respond to policy actions aimed at t ...
... side effects of monetary policy that focuses on the stock market. It follows that any strategy aimed at asset price volatility must recognize the central bank’s relative ignorance about (i) what true fundamental asset prices should be and (ii) how psychology will respond to policy actions aimed at t ...
Unemployment and Inflation
... The True Costs of High Inflation Menu Costs are the costs of updating prices due to inflation. In Germany 1920s restaurants sometimes changed the prices on their menus several times each day. Menu costs were coined to reflect the costly inputs such as labor, paper, and printing services used by rest ...
... The True Costs of High Inflation Menu Costs are the costs of updating prices due to inflation. In Germany 1920s restaurants sometimes changed the prices on their menus several times each day. Menu costs were coined to reflect the costly inputs such as labor, paper, and printing services used by rest ...
PDF - Lazard Asset Management
... CPI inflation above core CPI inflation, adding half a percentage point to February’s year-on-year change in headline CPI. While core CPI excludes the direct contribution of food and energy prices, it still captures their indirect contribution as an input to other ...
... CPI inflation above core CPI inflation, adding half a percentage point to February’s year-on-year change in headline CPI. While core CPI excludes the direct contribution of food and energy prices, it still captures their indirect contribution as an input to other ...
Monetary Policy Using the AD/AS Model Page 1 of 2
... macroeconomy. Let’s look at how we would represent monetary policy using the aggregate demand and aggregate supply curves and see if, in fact, money can make a difference in the short run or the long run and what that conclusion depends on. So we’re considering here monetary policy, which means we’r ...
... macroeconomy. Let’s look at how we would represent monetary policy using the aggregate demand and aggregate supply curves and see if, in fact, money can make a difference in the short run or the long run and what that conclusion depends on. So we’re considering here monetary policy, which means we’r ...
Chapter 8
... to receive incomes and the desire of firms to earn profits holds unemployment down and real GDP near its full employment level L/R AS – shows the relationship between full employment GDP and the price level ...
... to receive incomes and the desire of firms to earn profits holds unemployment down and real GDP near its full employment level L/R AS – shows the relationship between full employment GDP and the price level ...
Inflation Dynamics During and After the Zero Lower Bound Introduction
... the actual data. We consider two alternative scenarios, depicted in blue and red. If you cannot see the red line, it means that it is hiding behind the blue line. Under the red scenario, we simply change the target inflation rate to 4% and assume that the economy is experiencing the same fundamental ...
... the actual data. We consider two alternative scenarios, depicted in blue and red. If you cannot see the red line, it means that it is hiding behind the blue line. Under the red scenario, we simply change the target inflation rate to 4% and assume that the economy is experiencing the same fundamental ...
Thinking Like an Economist
... inconvenient and misallocates the individual’s personal resources of time, energy, and leisure. In the case of hyperinflation, inflation over 100%, the currency system breaks down and the economy reverts to barter. ...
... inconvenient and misallocates the individual’s personal resources of time, energy, and leisure. In the case of hyperinflation, inflation over 100%, the currency system breaks down and the economy reverts to barter. ...
Glossary
... Constant Money Growth Rule. The belief by Monetarist economists that the Federal Reserve Board should be bound by a fixed rule to increase the money supply by a fixed percent every year. Consumer Confidence. A measure of consumer expectations about the future of the economy. The number for 1985 is c ...
... Constant Money Growth Rule. The belief by Monetarist economists that the Federal Reserve Board should be bound by a fixed rule to increase the money supply by a fixed percent every year. Consumer Confidence. A measure of consumer expectations about the future of the economy. The number for 1985 is c ...
Macro_online_chapter_10_13e
... Will the economy move from a disequilibrium point back to longrun equilibrium “on its own”? That is, does the economy have a “selfcorrecting mechanism”? Arguably yes The four key markets are tightly connected such that a change in one market will cause a reaction in another market ...
... Will the economy move from a disequilibrium point back to longrun equilibrium “on its own”? That is, does the economy have a “selfcorrecting mechanism”? Arguably yes The four key markets are tightly connected such that a change in one market will cause a reaction in another market ...
Supply-side economics: its role in curing inflation
... increase the take-home pay that can be earned from an additional hour of work or a second job, but they also make it possible to attain any given standard of living with less work. ...
... increase the take-home pay that can be earned from an additional hour of work or a second job, but they also make it possible to attain any given standard of living with less work. ...
The Inflation Puzzle - VBA beleggingsprofessionals
... growth in non-material wealth, often at a near zero marginal price. The weightless economy is growing fast and the old economy measures have difficulty in capturing this. If, for instance, worldwide communication through calls, video or chat gets offered for free, what will it do to economic growth, ...
... growth in non-material wealth, often at a near zero marginal price. The weightless economy is growing fast and the old economy measures have difficulty in capturing this. If, for instance, worldwide communication through calls, video or chat gets offered for free, what will it do to economic growth, ...
Outline of Lecture 1 – Basic Economics Concepts
... Case Study: Why the central bank watches the stock market (and vice versa) Stock market booms households become wealthier consumer spending It becomes attractive for firms to issue new shares of stock Investment spending Since one of the central bank’s goals is to stabilize AD The cent ...
... Case Study: Why the central bank watches the stock market (and vice versa) Stock market booms households become wealthier consumer spending It becomes attractive for firms to issue new shares of stock Investment spending Since one of the central bank’s goals is to stabilize AD The cent ...
David Goldsbrough
... Aid projections underlying recent programs a little more optimistic, but not by much Analytical basis for some key elements of program design (e.g. the fiscal path) are often sketchy. Still not wellintegrated with analysis of effects of expenditures on real economy, key relative prices. Excessively ...
... Aid projections underlying recent programs a little more optimistic, but not by much Analytical basis for some key elements of program design (e.g. the fiscal path) are often sketchy. Still not wellintegrated with analysis of effects of expenditures on real economy, key relative prices. Excessively ...
1. For this question, assume that individuals do NOT hold currency
... a. no change in the real wage in the medium run b. an increase in the aggregate price level and an increase in output in the medium run c. an increase in the interest rate in the medium run d. no change in output in the medium run e. an increase in the real wage in the medium run 6. Assume that expe ...
... a. no change in the real wage in the medium run b. an increase in the aggregate price level and an increase in output in the medium run c. an increase in the interest rate in the medium run d. no change in output in the medium run e. an increase in the real wage in the medium run 6. Assume that expe ...
Real interest rate
... in real terms. Real income is nominal income minus inflation. An inflation rate of 10%, for example, accompanied by no change in nominal incomes would mean the average household was 10% poorer at the end of the year than at the beginning. ·Loss of savings: Savers are negatively effected by inflation ...
... in real terms. Real income is nominal income minus inflation. An inflation rate of 10%, for example, accompanied by no change in nominal incomes would mean the average household was 10% poorer at the end of the year than at the beginning. ·Loss of savings: Savers are negatively effected by inflation ...
International Trade and the Connection Between Excess Demand
... Growth in exports was more similar in the two sub-periods, growing from 4% of GDP in 1967 to 7% by the end of 1981, and then to 13% of GDP by the first quarter of 1999. The more recent period, that which begins in the early 1980's, has shown a shift in the US from a more isolated, independent econo ...
... Growth in exports was more similar in the two sub-periods, growing from 4% of GDP in 1967 to 7% by the end of 1981, and then to 13% of GDP by the first quarter of 1999. The more recent period, that which begins in the early 1980's, has shown a shift in the US from a more isolated, independent econo ...
Lecture 3a
... nominal (current market prices) and real (purchasing power) values. • Nominal values are price-weighted measures of goods and services. Nominal values increase and decrease as prices rise and fall, respectively. In the base year (period) of a price index, the nominal value equals the real value. • R ...
... nominal (current market prices) and real (purchasing power) values. • Nominal values are price-weighted measures of goods and services. Nominal values increase and decrease as prices rise and fall, respectively. In the base year (period) of a price index, the nominal value equals the real value. • R ...
CHAPTER 13 C Level Questions 1. In the sticky
... wages. Suppose further that labor contracts specify that the nominal wage be fully indexed for inflation as measured by the CPI. That is, the nominal wage is to be adjusted to fully compensate for changes in the consumer price index. How does this indexation alter the short run aggregate supply curv ...
... wages. Suppose further that labor contracts specify that the nominal wage be fully indexed for inflation as measured by the CPI. That is, the nominal wage is to be adjusted to fully compensate for changes in the consumer price index. How does this indexation alter the short run aggregate supply curv ...
Homework Assignment 3
... Adverse Selection. You are an investor in the market for junk bonds (which by custom have a face value of 100). There are a number of a number of firms that have projects that they would like to finance. Some of these projects are risky and some are relatively safe. Firms with risky projects are wil ...
... Adverse Selection. You are an investor in the market for junk bonds (which by custom have a face value of 100). There are a number of a number of firms that have projects that they would like to finance. Some of these projects are risky and some are relatively safe. Firms with risky projects are wil ...
Computing the Inflation Rate, the Current Price, and the Original Price
... Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. ...
... Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. ...
Chapter 7
... changes in prices of all new goods and services produced in the economy Broadest measure of prices; reflects both price changes and the public’s market responses to those price changes ...
... changes in prices of all new goods and services produced in the economy Broadest measure of prices; reflects both price changes and the public’s market responses to those price changes ...
Lecture5a - Harbert College of Business
... – If investors feel the prices of real goods will increase (inflation), it will take increased interest rates to encourage them to place their funds in financial assets. ...
... – If investors feel the prices of real goods will increase (inflation), it will take increased interest rates to encourage them to place their funds in financial assets. ...
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.