PPT
... Inflation Cycles Aggregate Demand Response The initial increase in costs creates a one-time rise in the price level, not inflation. To create inflation, aggregate demand must increase. That is, the Fed must increase the quantity of money persistently. ...
... Inflation Cycles Aggregate Demand Response The initial increase in costs creates a one-time rise in the price level, not inflation. To create inflation, aggregate demand must increase. That is, the Fed must increase the quantity of money persistently. ...
Value of Money
... • The same applies to employment of capital and other resources. • Since employment of all resources is unchanged, total output is also unchanged by the money supply. ...
... • The same applies to employment of capital and other resources. • Since employment of all resources is unchanged, total output is also unchanged by the money supply. ...
document
... • Zero inflation is probably unattainable and getting there involves output and unemployment costs that are too high. • The stimulative effect of a little inflation is necessary to keep unemployment reasonably low. • The imperfections of measuring price levels result in uncertainty about measuring t ...
... • Zero inflation is probably unattainable and getting there involves output and unemployment costs that are too high. • The stimulative effect of a little inflation is necessary to keep unemployment reasonably low. • The imperfections of measuring price levels result in uncertainty about measuring t ...
AD/AS Model - Gore High School
... - E.G. An increase in consumption spending, causes firms to increase output to meet the increase in demand. This causes firms to increase employment resulting in an increase in incomes. ...
... - E.G. An increase in consumption spending, causes firms to increase output to meet the increase in demand. This causes firms to increase employment resulting in an increase in incomes. ...
macroeconomics
... government, and the foreign sector want to spend (planned expenditures) exactly the amount of income that is being generated by the current level of production. If the economy is out of equilibrium, then production (income) is out of alignment with planned expenditures, hence businesses are forced t ...
... government, and the foreign sector want to spend (planned expenditures) exactly the amount of income that is being generated by the current level of production. If the economy is out of equilibrium, then production (income) is out of alignment with planned expenditures, hence businesses are forced t ...
unemployment
... policies to stimulate Aggregate Demand during recessions are aimed at reducing cyclical unemployment. 5. Full employment (the natural rate of unemployment) occurs when only frictional, structural, and seasonal unemployment exist. F. International Comparisons of Unemployment 1. Unemployment rates ten ...
... policies to stimulate Aggregate Demand during recessions are aimed at reducing cyclical unemployment. 5. Full employment (the natural rate of unemployment) occurs when only frictional, structural, and seasonal unemployment exist. F. International Comparisons of Unemployment 1. Unemployment rates ten ...
Comments on Daniel Benjamin and David Laibson:
... Behavioral Economics and the Phillips Curve. Behavioral economics has important implications for the Phillips curve and macroeconomic policy. In particular, it points to the possibility that the long run Phillips curve may not be vertical at low inflation rates when productivity growth is low. This ...
... Behavioral Economics and the Phillips Curve. Behavioral economics has important implications for the Phillips curve and macroeconomic policy. In particular, it points to the possibility that the long run Phillips curve may not be vertical at low inflation rates when productivity growth is low. This ...
Money Growth and Inflation
... Suppose a student has $20,000 of debt with a 7% nominal interest rate. The debt compounds over 10 years. • What is the nominal value of that debt? • What is the real value of that debt if…. • Inflation is very high (20%)? • If there is deflation (-20%)? • Is inflation good for borrowers or lenders? ...
... Suppose a student has $20,000 of debt with a 7% nominal interest rate. The debt compounds over 10 years. • What is the nominal value of that debt? • What is the real value of that debt if…. • Inflation is very high (20%)? • If there is deflation (-20%)? • Is inflation good for borrowers or lenders? ...
Kevin P. Hoover THE RATIONAL EXPECTATIONS REVOLUTION: AN ASSESSMENT
... path will be over some short horizon. To the new classicals such questions ai’e wrongly ?05ed~,and theh models are not adapted to ...
... path will be over some short horizon. To the new classicals such questions ai’e wrongly ?05ed~,and theh models are not adapted to ...
Workshop 6 The Building Blocks of Macroeconomics
... 7. You buy General Motors stock for $1,000 in the stock market. ______ 8. At the end of a year, a flour-milling firm finds that its inventories of grain and flour are $10,000 above the amounts of its inventories at the beginning of the year. ______ 9. A homemaker works hard caring for her spouse and ...
... 7. You buy General Motors stock for $1,000 in the stock market. ______ 8. At the end of a year, a flour-milling firm finds that its inventories of grain and flour are $10,000 above the amounts of its inventories at the beginning of the year. ______ 9. A homemaker works hard caring for her spouse and ...
SOLUTION EXAM 06/07/04
... M = quantity of money V = velocity of money P = prive level Y = quantity of output (real GDP) This equation states that the quantity of money (M) time the velocity of money (V) equals the price of output (P) times the amount of output. It relates the quantity of money (M) to the nominal value of out ...
... M = quantity of money V = velocity of money P = prive level Y = quantity of output (real GDP) This equation states that the quantity of money (M) time the velocity of money (V) equals the price of output (P) times the amount of output. It relates the quantity of money (M) to the nominal value of out ...
Interest Rate
... The bank lends $900 out to Bob (excess reserves) Bob deposits the $900 in his bank Bob’s bank must hold $90. It loans out $810 to Jill Jill deposits $810 in her bank ...
... The bank lends $900 out to Bob (excess reserves) Bob deposits the $900 in his bank Bob’s bank must hold $90. It loans out $810 to Jill Jill deposits $810 in her bank ...
Blanchard4e_IM_Ch24 - Southwestern Secure Online
... the central bank’s program will have no effect on unemployment (it will return to the natural rate) but will result in high inflation. Under these circumstances, economic performance would improve if the central bank could commit itself credibly to maintain low money growth. In this case, the public ...
... the central bank’s program will have no effect on unemployment (it will return to the natural rate) but will result in high inflation. Under these circumstances, economic performance would improve if the central bank could commit itself credibly to maintain low money growth. In this case, the public ...
Chapter 12
... monetary policy to fight recessions, then not tighten monetary policy enough later ...
... monetary policy to fight recessions, then not tighten monetary policy enough later ...
FREE Sample Here - We can offer most test bank and
... remained low, although the unemployment rate gradually fell. Between 1990 and 1991, the unemployment rate rose although the inflation rate fell. From 1992 to 1997 both the inflation and unemployment rates fell. During the 2000s, inflation has remained stable and low, while unemployment rose signific ...
... remained low, although the unemployment rate gradually fell. Between 1990 and 1991, the unemployment rate rose although the inflation rate fell. From 1992 to 1997 both the inflation and unemployment rates fell. During the 2000s, inflation has remained stable and low, while unemployment rose signific ...
introduction and measurement
... remained low, although the unemployment rate gradually fell. Between 1990 and 1991, the unemployment rate rose although the inflation rate fell. From 1992 to 1997 both the inflation and unemployment rates fell. During the 2000s, inflation has remained stable and low, while unemployment rose signific ...
... remained low, although the unemployment rate gradually fell. Between 1990 and 1991, the unemployment rate rose although the inflation rate fell. From 1992 to 1997 both the inflation and unemployment rates fell. During the 2000s, inflation has remained stable and low, while unemployment rose signific ...
Revision – Demand-side and supply
... An expansionary policy increases output and employment (Y to Y1) and increases inflation (P to P1). A contractionary policy decreases output and employment (Y to Y2) and decreases inflation (P to P2). ...
... An expansionary policy increases output and employment (Y to Y1) and increases inflation (P to P1). A contractionary policy decreases output and employment (Y to Y2) and decreases inflation (P to P2). ...
Final Exam 2011
... The effects of macroeconomic stabilization policy depend on a number of factors. a. Clearly illustrate and discuss how the specification of the Aggregate Supply curve matters for determining the effects of stabilization policy on output and prices. b. Clearly explain one set of circumstances under w ...
... The effects of macroeconomic stabilization policy depend on a number of factors. a. Clearly illustrate and discuss how the specification of the Aggregate Supply curve matters for determining the effects of stabilization policy on output and prices. b. Clearly explain one set of circumstances under w ...
File
... 1. The business cycle is best defined as alternating periods of increases and decreases in the rate of inflation in the economy. T F 2. Business cycles tend to be of roughly equal duration and intensity. T F 3. Fluctuations in real output in the economy are caused by economic shocks, and because pr ...
... 1. The business cycle is best defined as alternating periods of increases and decreases in the rate of inflation in the economy. T F 2. Business cycles tend to be of roughly equal duration and intensity. T F 3. Fluctuations in real output in the economy are caused by economic shocks, and because pr ...
Monetary expansion raises AD in the SR
... Business investment & other components of spending A depend not just on the nominal interest rate i, but on the real interest rate r ≡ i - e . (To compute corporate cost of capital, it should also be long-term i, and adjusted for taxes.) ...
... Business investment & other components of spending A depend not just on the nominal interest rate i, but on the real interest rate r ≡ i - e . (To compute corporate cost of capital, it should also be long-term i, and adjusted for taxes.) ...
Admission Examination in Economics
... Which of the following changes is most likely to remove the conditions of excess supply? A. A small reduction in price that stimulates a large increase in demand B. A small reduction in price, resulting in a large shift to the left in the supply curve, and so a large fall in demand C. A large number ...
... Which of the following changes is most likely to remove the conditions of excess supply? A. A small reduction in price that stimulates a large increase in demand B. A small reduction in price, resulting in a large shift to the left in the supply curve, and so a large fall in demand C. A large number ...
Your Chapter 15-18 Questions Chapter 15 1. Money is a. a synonym
... 5. An increase in money supply, other things constant, a. cause changes in relative price between goods and services b. generates an increase in the demand for money c. Causes the price level to increase d. causes the purchasing power of money to increase 6. The Fed wants to target interest rates, i ...
... 5. An increase in money supply, other things constant, a. cause changes in relative price between goods and services b. generates an increase in the demand for money c. Causes the price level to increase d. causes the purchasing power of money to increase 6. The Fed wants to target interest rates, i ...
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.