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 ...
Chapter 12
... o investors consider: 1) relative levels of interest rates 2) expected changes in exchange rate itself over term of investment o nominal interest rate is first approximation o however rate of inflation is significant factor o real interest rate may be more important to ...
... o investors consider: 1) relative levels of interest rates 2) expected changes in exchange rate itself over term of investment o nominal interest rate is first approximation o however rate of inflation is significant factor o real interest rate may be more important to ...
mehr...
... The recent hike in oil prices and the depreciation of the euro are the main forces keeping inflation at its current level. Under the assumption that oil prices remain between $52 and $55/barrel and that the dollar/euro exchange rate fluctuates around 1.20 in the second half of the year, inflation wo ...
... The recent hike in oil prices and the depreciation of the euro are the main forces keeping inflation at its current level. Under the assumption that oil prices remain between $52 and $55/barrel and that the dollar/euro exchange rate fluctuates around 1.20 in the second half of the year, inflation wo ...
Chapter 8
... Growth in real GDP does not guarantee growth in real GDP per capita. • If the growth in population exceeds the growth in real GDP, real GDP per capita will fall (lower standards of living). • Expansion of total output relative to population results in: – Rising real wages and income – Higher standa ...
... Growth in real GDP does not guarantee growth in real GDP per capita. • If the growth in population exceeds the growth in real GDP, real GDP per capita will fall (lower standards of living). • Expansion of total output relative to population results in: – Rising real wages and income – Higher standa ...
Economics 3307
... There are many alternative ways to model price stickiness. Some imply a horizontal SRAS curve (like the one we have been using), and some imply an upward-sloping SRAS curve. Some short-run SRAS studies are based on “incomplete information.” In these stories, a change in AD is not met with a fully co ...
... There are many alternative ways to model price stickiness. Some imply a horizontal SRAS curve (like the one we have been using), and some imply an upward-sloping SRAS curve. Some short-run SRAS studies are based on “incomplete information.” In these stories, a change in AD is not met with a fully co ...
Economic Growth, Business Cycles, Unemployment, and Inflation
... Downturns and panics have generally been less severe. The duration of business cycles has increased. The average length of expansions has increased while the average length of contractions has decreased. ...
... Downturns and panics have generally been less severe. The duration of business cycles has increased. The average length of expansions has increased while the average length of contractions has decreased. ...
Inflation - luthapmacro
... -Firms cannot respond to increases in demand by increasing output. So, in effect, further increases in demand raise the price level. The rate of inflation may be high and still rising because total demand greatly exceeds society’s capacity to produce. There is no increase in real output to asorb som ...
... -Firms cannot respond to increases in demand by increasing output. So, in effect, further increases in demand raise the price level. The rate of inflation may be high and still rising because total demand greatly exceeds society’s capacity to produce. There is no increase in real output to asorb som ...
PROBLEM SET 3 14.02 Macroeconomics March 15, 2006 Due March 22, 2006
... I. Answer each as True, False, or Uncertain, and explain your choice. 1. Wages are usually below the reservation wage in Europe because the unemployment rate in Europe is so high. 2. Powerful labor unions will decrease the natural rate of unemployment. 3. The aggregate supply curve is upward sloping ...
... I. Answer each as True, False, or Uncertain, and explain your choice. 1. Wages are usually below the reservation wage in Europe because the unemployment rate in Europe is so high. 2. Powerful labor unions will decrease the natural rate of unemployment. 3. The aggregate supply curve is upward sloping ...
5.1 - Government Economic Policy
... • The government increase the money supply by printing more notes and coins • However it can’t just randomly decide to print more money!! • Instead….. • The government uses the newly created money to buy financial assets (government and corporate bonds) from banks and other private organisations • T ...
... • The government increase the money supply by printing more notes and coins • However it can’t just randomly decide to print more money!! • Instead….. • The government uses the newly created money to buy financial assets (government and corporate bonds) from banks and other private organisations • T ...
FROM INFLATION TO HYPERINFLATION: REASONS FOR GERMAN MACROECONOMIC IMPOTENCE IN THE
... Although the inflation was mismanaged by the government, these mismanagements alone did not cause the crisis of 1922-1923. The murder of Walther Rathenau in July 1922 shattered any remaining confidence in the political and economic stability of the Weimar Republic. His murder, shortly after the murd ...
... Although the inflation was mismanaged by the government, these mismanagements alone did not cause the crisis of 1922-1923. The murder of Walther Rathenau in July 1922 shattered any remaining confidence in the political and economic stability of the Weimar Republic. His murder, shortly after the murd ...
stabilization policy.notebook - S Hoyt
... more people to borrow which causes more economic growth and higher inflation. Fast growth=higher inflation 2. Money Supply Small increase in money supply increases economic activity with no increase in inflation. When economy is no longer held back by low money, inflation then starts to ris ...
... more people to borrow which causes more economic growth and higher inflation. Fast growth=higher inflation 2. Money Supply Small increase in money supply increases economic activity with no increase in inflation. When economy is no longer held back by low money, inflation then starts to ris ...
Presentation to Town Hall Los Angeles Los Angeles, California
... past 13 months, there are still over 7 million fewer jobs in the United States than we had before the downturn. The recovery has sputtered at times and our forward progress has been disappointingly slow. That’s actually not too surprising though, given the type of recession we’ve been through. Exper ...
... past 13 months, there are still over 7 million fewer jobs in the United States than we had before the downturn. The recovery has sputtered at times and our forward progress has been disappointingly slow. That’s actually not too surprising though, given the type of recession we’ve been through. Exper ...
AP Macreconomics - Graphical Overview
... exports will cause AD to shift. If consumer wealth increases, expectations become positive, household indebtedness decreases, or taxes decrease, AD will shift to the right (increase). If interest rates decrease or profit expectations increase, AD will shift to the right (increase). Profit expecta ...
... exports will cause AD to shift. If consumer wealth increases, expectations become positive, household indebtedness decreases, or taxes decrease, AD will shift to the right (increase). If interest rates decrease or profit expectations increase, AD will shift to the right (increase). Profit expecta ...
Professor`s Name
... In the long run the economy wound up with a higher unemployment rate (5%), lower real GDP, and an inflation rate near zero. In addition the real wage (wage divided by the price level) and real interest rates were higher in the long run, and so was the price level. What appears to have happened is th ...
... In the long run the economy wound up with a higher unemployment rate (5%), lower real GDP, and an inflation rate near zero. In addition the real wage (wage divided by the price level) and real interest rates were higher in the long run, and so was the price level. What appears to have happened is th ...
100 €1.00
... • Nominal GDP increases because production increases and because prices increase (Inflation). • Use the GDP deflator to take out the effect of inflation and reveal real GDP. • The Base year for current SNA is 2000. • Inflation rate = rate of change of price level, 130% = (230-100)/100*100 ...
... • Nominal GDP increases because production increases and because prices increase (Inflation). • Use the GDP deflator to take out the effect of inflation and reveal real GDP. • The Base year for current SNA is 2000. • Inflation rate = rate of change of price level, 130% = (230-100)/100*100 ...
stance of monetary policy
... Take for example 1979, when the Federal Funds rate was over 10% and yet inflation was galloping at about the highest rate in US history and wages were soaring. Rates were historically “high”, yet clearly the economy was under too much monetary stimulus. Or the period of 1996-97, when the Fed’s targe ...
... Take for example 1979, when the Federal Funds rate was over 10% and yet inflation was galloping at about the highest rate in US history and wages were soaring. Rates were historically “high”, yet clearly the economy was under too much monetary stimulus. Or the period of 1996-97, when the Fed’s targe ...
Interest Rates - Cloudfront.net
... market basket, consumers buy less of these products and more substitutes that may not be part of the market basket. (Result: CPI may be higher than what consumers are really paying) 2. New Products- The CPI market basket may not include the newest consumer products. (Result: CPI measures prices but ...
... market basket, consumers buy less of these products and more substitutes that may not be part of the market basket. (Result: CPI may be higher than what consumers are really paying) 2. New Products- The CPI market basket may not include the newest consumer products. (Result: CPI measures prices but ...
The ECB Will Stand Pat Today After Policy Adjustments Last Month
... reiterate the governing council’s focus on core inflation, which it expects to stay below the central bank’s 2% target in 2017. The minutes of the December meeting ...
... reiterate the governing council’s focus on core inflation, which it expects to stay below the central bank’s 2% target in 2017. The minutes of the December meeting ...
The great policy rotation – refocussing from monetary policy to fiscal
... target (as this might make achieving a lower real official rate of interest easier – eg getting a real interest rate of -3% if that is needed to boost the economy is much easier if inflation is 3% than if it is 2%) or switch to targeting either price levels or nominal GDP levels (which would mean th ...
... target (as this might make achieving a lower real official rate of interest easier – eg getting a real interest rate of -3% if that is needed to boost the economy is much easier if inflation is 3% than if it is 2%) or switch to targeting either price levels or nominal GDP levels (which would mean th ...
Macro2 Exercise #2
... ______________ All in all, did this last example provide an example of sound economic policy? ___ (Yes, No). Why or why not? ____________ ___________ ___________ ___________ _____________________________________________. Click “New Term in Office.” This time, select “Inflation” as the state of the m ...
... ______________ All in all, did this last example provide an example of sound economic policy? ___ (Yes, No). Why or why not? ____________ ___________ ___________ ___________ _____________________________________________. Click “New Term in Office.” This time, select “Inflation” as the state of the m ...
Vertical Phillips Curve?
... • This assumed that economic agents used all available information to make rational decisions (rational expectations) and understood that there was no short-term trade-off and that ‘money’ wage increases in line with inflation were not ‘real’ wage increases. ...
... • This assumed that economic agents used all available information to make rational decisions (rational expectations) and understood that there was no short-term trade-off and that ‘money’ wage increases in line with inflation were not ‘real’ wage increases. ...
Lecture O: Overview
... Since governments print money, they have to have some sort of policy about managing the supply of money that they print. Both price inflation of goods and services and interest rates are affected by the supply of money. Inflation is also part of interest rates. Demand for money affects interest rate ...
... Since governments print money, they have to have some sort of policy about managing the supply of money that they print. Both price inflation of goods and services and interest rates are affected by the supply of money. Inflation is also part of interest rates. Demand for money affects interest rate ...
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.