Macro1
... – An inflation that starts because aggregate demand increases is called demand-pull inflation. – Demand-pull inflation can begin with any factor that increases aggregate demand. – Examples are a cut in the interest rate, an increase in the quantity of money, an increase in government expenditure, a ...
... – An inflation that starts because aggregate demand increases is called demand-pull inflation. – Demand-pull inflation can begin with any factor that increases aggregate demand. – Examples are a cut in the interest rate, an increase in the quantity of money, an increase in government expenditure, a ...
Presentation to the members of Parliament at the Conference on... by the European Economics and Financial Centre
... sector has been a key source of strength in the current expansion. The question is: will this source of strength reverse course and become instead a source of weakness? Put more bluntly: Is there a house-price “bubble” that might collapse, and if so, what would that mean for the U.S. economy? To ans ...
... sector has been a key source of strength in the current expansion. The question is: will this source of strength reverse course and become instead a source of weakness? Put more bluntly: Is there a house-price “bubble” that might collapse, and if so, what would that mean for the U.S. economy? To ans ...
DPEco2.3.4 Low and Stable Rates of Inflation DPEco2.3.4 The
... patterns of households in the economy. Price data from the CPI is used in many ways by the government, businesses, and society in general. They can affect interest rates, tax allowances, wages, state benefits, pensions, maintenance payments and many other 'index-linked' contracts. ...
... patterns of households in the economy. Price data from the CPI is used in many ways by the government, businesses, and society in general. They can affect interest rates, tax allowances, wages, state benefits, pensions, maintenance payments and many other 'index-linked' contracts. ...
Practice Questions-ch28
... 14) According to real business cycle theory, if the Bank of Canada increases the quantity of money when real GDP decreases, real GDP A) will decrease due to the inefficiencies introduced into production as a result. B) will increase but only temporarily. C) and the price level will both be unaffecte ...
... 14) According to real business cycle theory, if the Bank of Canada increases the quantity of money when real GDP decreases, real GDP A) will decrease due to the inefficiencies introduced into production as a result. B) will increase but only temporarily. C) and the price level will both be unaffecte ...
Business Cycles
... • The increasing importance of services and the declining importance of goods. Because durable goods are usually more expensive than services, during a recession households will cut back more on purchases of durables than they will on purchases of services. • The establishment of unemployment insura ...
... • The increasing importance of services and the declining importance of goods. Because durable goods are usually more expensive than services, during a recession households will cut back more on purchases of durables than they will on purchases of services. • The establishment of unemployment insura ...
Power Point - The University of Chicago Booth School of Business
... 8. What makes economies grow in the LONG RUN? 9. How worried should we be about long run government deficits? What are the costs/benefits of altering the nature of the Federal Reserve? 10. What is the influence of China and India on the U.S. economy? 11. Brexit? 12. What are costs/benefits of altere ...
... 8. What makes economies grow in the LONG RUN? 9. How worried should we be about long run government deficits? What are the costs/benefits of altering the nature of the Federal Reserve? 10. What is the influence of China and India on the U.S. economy? 11. Brexit? 12. What are costs/benefits of altere ...
Chpt24
... After an increase in interest rates shifts the AD curve, real output first falls and then returns to the natural level after the AS curve shifts. These estimates show that the process involves a total lag of 1 to 3 years, or longer. Different studies, based on different periods and methods, do ...
... After an increase in interest rates shifts the AD curve, real output first falls and then returns to the natural level after the AS curve shifts. These estimates show that the process involves a total lag of 1 to 3 years, or longer. Different studies, based on different periods and methods, do ...
This PDF is a selection from an out-of-print volume from... of Economic Research
... own tax rules. If the potential tax-inflation gain that I had calculated is unique to the United States, it might be possible to achieve the same gain by shifting the U.S. tax system in the direction of the tax systems of other major countries. But if the tax-inflation interaction is a source of sig ...
... own tax rules. If the potential tax-inflation gain that I had calculated is unique to the United States, it might be possible to achieve the same gain by shifting the U.S. tax system in the direction of the tax systems of other major countries. But if the tax-inflation interaction is a source of sig ...
NBER WORKING PAPER SERIES MONETARY POLICY IN AN UNCERTAIN ECONOMY Martin Feldstein
... to miss the target if unusual conditions make that appropriate. Such a numerical target is attractive for anchoring inflation expectations, with potentially favorable effects on the economy and on financial markets. But all good things come at some cost. The potential gains from anchoring inflation ...
... to miss the target if unusual conditions make that appropriate. Such a numerical target is attractive for anchoring inflation expectations, with potentially favorable effects on the economy and on financial markets. But all good things come at some cost. The potential gains from anchoring inflation ...
A Constant Unit of Account Richard W. Rahn
... each currency in the basket: the U.S. dollar is assigned the top spot with a weight of 32 percent, while the euro is number two with a weight of 22 percent. The relative weight of the CUA would be transparently adjusted to reflect (1) changes in exchange rates and (2) the relative importance of each ...
... each currency in the basket: the U.S. dollar is assigned the top spot with a weight of 32 percent, while the euro is number two with a weight of 22 percent. The relative weight of the CUA would be transparently adjusted to reflect (1) changes in exchange rates and (2) the relative importance of each ...
BM 2.04 Notes - ycampbell
... • DEFLATION: An extended decline in the average level of prices. This is the exact opposite of inflation • CONSUMER PRICE INDEX: An index of prices of goods and services typically purchased by urban consumers. • STANDARD OF LIVING: In principle, an economy's ability to produce the goods and services ...
... • DEFLATION: An extended decline in the average level of prices. This is the exact opposite of inflation • CONSUMER PRICE INDEX: An index of prices of goods and services typically purchased by urban consumers. • STANDARD OF LIVING: In principle, an economy's ability to produce the goods and services ...
The Impact of Inflation
... This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all avail ...
... This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all avail ...
Macro 3 Exercise #2 Answers
... need to borrow the real rate represents the opportunity cost -- what they could make by lending the funds they would otherwise use for their own investment. Does consumption change as a result of interest rate changes? Yes, there is also crowding out of consumption, higher real rates increase the re ...
... need to borrow the real rate represents the opportunity cost -- what they could make by lending the funds they would otherwise use for their own investment. Does consumption change as a result of interest rate changes? Yes, there is also crowding out of consumption, higher real rates increase the re ...
Can, Or Should, A Central Bank InFlation Target?
... natural rate of unemployment, he was essentially giving up any rationalization that the central bank could exogenously control the quantity of money to directly affect the rate of inflation. Instead, there was a subtle change in the monetarist philosophy that implicitly recognized that the money sup ...
... natural rate of unemployment, he was essentially giving up any rationalization that the central bank could exogenously control the quantity of money to directly affect the rate of inflation. Instead, there was a subtle change in the monetarist philosophy that implicitly recognized that the money sup ...
Management`s primary goal is to maximize stockholder
... focuses on expectations theory. In 1993, short-term interest rates declined to levels not seen in decades, possibly indicating very low expected short-term inflation. While actual inflation had dropped significantly, perhaps investors believed that low inflation was not likely to persist for long an ...
... focuses on expectations theory. In 1993, short-term interest rates declined to levels not seen in decades, possibly indicating very low expected short-term inflation. While actual inflation had dropped significantly, perhaps investors believed that low inflation was not likely to persist for long an ...
Economics 514
... even to achieve their high output goal. Any lower expectations would lead to systematic errors in under-predicting inflation by the corporate sector. Since inflation policy has little effect on output, the government might like lower inflation. But the government has a difficult time achieving credi ...
... even to achieve their high output goal. Any lower expectations would lead to systematic errors in under-predicting inflation by the corporate sector. Since inflation policy has little effect on output, the government might like lower inflation. But the government has a difficult time achieving credi ...
“Keep It Simple
... manager visits (and former Goldman partner) that the “greatest tragedy of the last 100 years was supporting the corrupt and inefficient banking system,” (which includes his own alma mater at GS) the ultimate guilt for our current a situation lies more fairly in the hands of the average American and ...
... manager visits (and former Goldman partner) that the “greatest tragedy of the last 100 years was supporting the corrupt and inefficient banking system,” (which includes his own alma mater at GS) the ultimate guilt for our current a situation lies more fairly in the hands of the average American and ...
Is RUSSIA THREATENED WITH HYPERINFLATION? Oleg Bogomolov
... of the state property by lower-level authorities or economic organs. This adds virtually nothing to replenishment of the state treasury. On the other hand, the employees of the state enterprises are showing an interest in buy-out options. However, this is only possible on borrowed resources, since a ...
... of the state property by lower-level authorities or economic organs. This adds virtually nothing to replenishment of the state treasury. On the other hand, the employees of the state enterprises are showing an interest in buy-out options. However, this is only possible on borrowed resources, since a ...
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.