105-notes inflation-stagflation-phillipscurve
... events because they are based on expected economic conditions and government policy, not past inflation rates. A strong version of forward-looking expectation is called rational expectation. Rational expectations are not always correct — rather, the assumption is that people make the best possible d ...
... events because they are based on expected economic conditions and government policy, not past inflation rates. A strong version of forward-looking expectation is called rational expectation. Rational expectations are not always correct — rather, the assumption is that people make the best possible d ...
A rise in the price of oil imports has resulted in a decrease of short
... a. How greatly increasing the money supply does not increase AD when people’s preferences to buy goods has gone to zero. b. How the federal government can not increase its own spending when there is zero money left in the treasury from tax revenue. c. How the fed can not increase the money supply fu ...
... a. How greatly increasing the money supply does not increase AD when people’s preferences to buy goods has gone to zero. b. How the federal government can not increase its own spending when there is zero money left in the treasury from tax revenue. c. How the fed can not increase the money supply fu ...
Key Terms What is Multiplier Effect?
... Many people invest in stocks and some of them might be even successful but only few people understand why the stock market reacts to the announcements made by the Government and the RBI. You might have heard Bank Rate, Repo Rate, Cash Reserve Ratio (CRR), Tax Cuts, Government Spending, inflation and ...
... Many people invest in stocks and some of them might be even successful but only few people understand why the stock market reacts to the announcements made by the Government and the RBI. You might have heard Bank Rate, Repo Rate, Cash Reserve Ratio (CRR), Tax Cuts, Government Spending, inflation and ...
Exam - Pearson Canada
... B. a right angle (i.e. two sides of a square or rectangle). C. a smooth curve (i.e. part of a circle or oval). D. a cross. E. a series of five straight lines each with different slopes. 20. A university has a fitness club. All 5000 members of the university community pay $100 a year to be a member o ...
... B. a right angle (i.e. two sides of a square or rectangle). C. a smooth curve (i.e. part of a circle or oval). D. a cross. E. a series of five straight lines each with different slopes. 20. A university has a fitness club. All 5000 members of the university community pay $100 a year to be a member o ...
Bank of Canada`s mandate renewed
... easing monetary conditions. Such tools include forward guidance, massive asset purchases and the adoption of negative interest rates. Forward guidance is information that central banks provide about the future path of key interest rates. Guidance can be formulated in various ways. For example, the h ...
... easing monetary conditions. Such tools include forward guidance, massive asset purchases and the adoption of negative interest rates. Forward guidance is information that central banks provide about the future path of key interest rates. Guidance can be formulated in various ways. For example, the h ...
Economic Schools of Thought – Monetarism
... M1 money growth by means of tight control of a narrow monetary aggregate. Monetarists argued that the episode was actually not monetarist in its design because growth rates of M1 fluctuated very widely on a month-to-month basis; the operating procedures in place were, because of lagged reserve requi ...
... M1 money growth by means of tight control of a narrow monetary aggregate. Monetarists argued that the episode was actually not monetarist in its design because growth rates of M1 fluctuated very widely on a month-to-month basis; the operating procedures in place were, because of lagged reserve requi ...
Short-run Phillips Curve
... relationship between unemployment and inflation known as the short-run Phillips curve. This curve is shifted by changes in the expected rate of inflation. 2. The long-run Phillips curve, which shows the relationship between unemployment and inflation once expectations have had time to adjust, is ver ...
... relationship between unemployment and inflation known as the short-run Phillips curve. This curve is shifted by changes in the expected rate of inflation. 2. The long-run Phillips curve, which shows the relationship between unemployment and inflation once expectations have had time to adjust, is ver ...
Answer Key Testname: QUIZ5.TST
... C) interest rates have no effect on the demand for money. D) both A and B of the above are correct. 3) The Keynesian theory of money demand emphasizes the importance of A) irrational behavior on the part of some economic agents. B) a constant velocity. C) interest rates on the demand for money. D) a ...
... C) interest rates have no effect on the demand for money. D) both A and B of the above are correct. 3) The Keynesian theory of money demand emphasizes the importance of A) irrational behavior on the part of some economic agents. B) a constant velocity. C) interest rates on the demand for money. D) a ...
Macro2 Exercise #2 Answers
... GDP increased above the last example? Yes (Yes, No). What was the major cost of this policy? This policy caused a near hyper-inflation rate of 94.49%. What are the problems with such a high inflation rate in terms of inflationary expectations? With such a high inflation rate, inflationary expectatio ...
... GDP increased above the last example? Yes (Yes, No). What was the major cost of this policy? This policy caused a near hyper-inflation rate of 94.49%. What are the problems with such a high inflation rate in terms of inflationary expectations? With such a high inflation rate, inflationary expectatio ...
EPS Session4 2011
... During 2003-4, as nominal interest rates fell to near zero, there was much discussion of the need for central banks to have recourse to ‘unconventional measures’ in order to stimulate aggregate demand. These measures included: a) b) c) d) e) ...
... During 2003-4, as nominal interest rates fell to near zero, there was much discussion of the need for central banks to have recourse to ‘unconventional measures’ in order to stimulate aggregate demand. These measures included: a) b) c) d) e) ...
The change of paradigm of Milton Friedman
... So far, monetarism doesn’t accept that external factors to money supply may be the cuase inflation. It is all about the quantity of money per unit of output what shapes the inflation rate, and all other factor are just excuses of politicians that not believe his statements. For example, he maintaine ...
... So far, monetarism doesn’t accept that external factors to money supply may be the cuase inflation. It is all about the quantity of money per unit of output what shapes the inflation rate, and all other factor are just excuses of politicians that not believe his statements. For example, he maintaine ...
1. Circular Flow. In the circular flow model of the economy, income is
... f. Output variability means that actual real GDP will be more volatile when inflation is high. This results from higher and more volatile inflation, which raises uncertainty which reduces risk taking behavior, and higher and more volatile interest rates, which depresses investment activity. g. More ...
... f. Output variability means that actual real GDP will be more volatile when inflation is high. This results from higher and more volatile inflation, which raises uncertainty which reduces risk taking behavior, and higher and more volatile interest rates, which depresses investment activity. g. More ...
Short-Run Model Essentials
... Up to this point, our discussions of unemployment, inflation, output, and income have revolved around how we measure theses indicators of economic performance. Now we want to focus on understanding how real‐world events and government policy change these measures of economic performance. Our too ...
... Up to this point, our discussions of unemployment, inflation, output, and income have revolved around how we measure theses indicators of economic performance. Now we want to focus on understanding how real‐world events and government policy change these measures of economic performance. Our too ...
Goal 1: Define and draw model of macroeconomic equilibrium
... -Movement from Qf to Q1 is a recession -less workers are needed causing cyclical unemployment Decreases in AS: Cost-Push Inflation -Example: Major terrorist attack on oil facilities -Drives oil prices up 300 percent -high energy prices would drive up production costs and distribution costs -AS curv ...
... -Movement from Qf to Q1 is a recession -less workers are needed causing cyclical unemployment Decreases in AS: Cost-Push Inflation -Example: Major terrorist attack on oil facilities -Drives oil prices up 300 percent -high energy prices would drive up production costs and distribution costs -AS curv ...
exercises for q2
... d) none of the above. 2. Cyclical unemployment is frequently caused by: a) shifts in the economy that make certain job skills obsolete; b) temporary layoffs in industries such as agriculture; c) the impact of recession on employment; d) none of the above. 3. The natural rate of unemployment tends to ...
... d) none of the above. 2. Cyclical unemployment is frequently caused by: a) shifts in the economy that make certain job skills obsolete; b) temporary layoffs in industries such as agriculture; c) the impact of recession on employment; d) none of the above. 3. The natural rate of unemployment tends to ...
AP Macroeconomics Unit III Fall 2011
... The GDP Deflator versus the Consumer Price Index • The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year (only occasionally does the BLS change the basket)... • …whereas the GDP deflator compares the price of currently produc ...
... The GDP Deflator versus the Consumer Price Index • The consumer price index compares the price of a fixed basket of goods and services to the price of the basket in the base year (only occasionally does the BLS change the basket)... • …whereas the GDP deflator compares the price of currently produc ...
Deflation, Globalization and the New Paradigm of Monetary
... undoing damage that deflation has done in increasing real value of debt ...
... undoing damage that deflation has done in increasing real value of debt ...
Economics: Principles and Applications, 2e by Robert E. Hall & Marc
... In the short run, the Fed can move along the Phillips curve by adjusting the rate at which the AD curve shifts rightward. When the Fed moves the economy downward and rightward along the Phillips curve, the unemployment rate increases, and the inflation rate decreases. ...
... In the short run, the Fed can move along the Phillips curve by adjusting the rate at which the AD curve shifts rightward. When the Fed moves the economy downward and rightward along the Phillips curve, the unemployment rate increases, and the inflation rate decreases. ...
File
... 4. A change in the price level causes a change in the amount of aggregated spending and therefore a change in the amount of real GDP. This is represented by a movement along the AD curve. If one of the determinants of demand changes it will cause the entire curve to shift. 5. The aggregate demand cu ...
... 4. A change in the price level causes a change in the amount of aggregated spending and therefore a change in the amount of real GDP. This is represented by a movement along the AD curve. If one of the determinants of demand changes it will cause the entire curve to shift. 5. The aggregate demand cu ...
Internal rate of return RAB – Regulated Asset Base
... The draft regulation, if passed in its current format, will have little meaning if measures such as the WACC and RAB are not placed in appropriate regulatory economic context. Our report suggests that prices, revenues and profits should be controlled such that investors have sufficient incentives to ...
... The draft regulation, if passed in its current format, will have little meaning if measures such as the WACC and RAB are not placed in appropriate regulatory economic context. Our report suggests that prices, revenues and profits should be controlled such that investors have sufficient incentives to ...
Answers to the sample exam
... Cost-push inflation- The AS (from AS0 to AS1) curve shifts left due to rising production costs in the economy, driving output down and prices up. A rise in the price level equates to inflation in this model, so the shift up in AS (increase in costs) leads to inflation. AS1 ...
... Cost-push inflation- The AS (from AS0 to AS1) curve shifts left due to rising production costs in the economy, driving output down and prices up. A rise in the price level equates to inflation in this model, so the shift up in AS (increase in costs) leads to inflation. AS1 ...
Monetary Policy
... • If the Fed can increase real employment and output by increasing the money supply, why don’t we just keep printing money? – Not all prices adjust in the short run – Eventually, the real value of money will be lower – In the long run: • Real impacts of the monetary policy disappear • Monetary polic ...
... • If the Fed can increase real employment and output by increasing the money supply, why don’t we just keep printing money? – Not all prices adjust in the short run – Eventually, the real value of money will be lower – In the long run: • Real impacts of the monetary policy disappear • Monetary polic ...
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.