Inflation in the Euro Area
... years after their introduction. However, it may take several years before new goods and services are included in the basket of goods and services used to calculate the price index, and thus the fall in their prices may be missed. An important problem in handling new goods and services is also that ...
... years after their introduction. However, it may take several years before new goods and services are included in the basket of goods and services used to calculate the price index, and thus the fall in their prices may be missed. An important problem in handling new goods and services is also that ...
Bank of England Inflation Report February 2011
... fiscal consolidation and squeeze on households’ purchasing power are likely to act as a brake. After some near-term weakness, GDP growth is judged to be about as likely to be above as below its historical average rate. Even so, the depth of the recession means that some spare capacity is likely to p ...
... fiscal consolidation and squeeze on households’ purchasing power are likely to act as a brake. After some near-term weakness, GDP growth is judged to be about as likely to be above as below its historical average rate. Even so, the depth of the recession means that some spare capacity is likely to p ...
Exercise 6 (+additional question) in Mankiw:
... total factor productivity between the years? Problem 8.3: Assume an economy which is characterized by perfect competition in the goods and labor market, in which the owners of capital get one-third of national income, and the workers receive two-thirds. Assume a Cobb-Douglas aggregate production fun ...
... total factor productivity between the years? Problem 8.3: Assume an economy which is characterized by perfect competition in the goods and labor market, in which the owners of capital get one-third of national income, and the workers receive two-thirds. Assume a Cobb-Douglas aggregate production fun ...
AP Macro Ch. 24 Measuring the Cost of Living
... AP Macro Ch. 24 Measuring the Cost of Living 33 Dollar figures from different points in time do not represent a valid comparison of purchasing power. Therefore, to compare a dollar figure from the past to a dollar figure today, the older figure should be inflated using a ________. Price index ...
... AP Macro Ch. 24 Measuring the Cost of Living 33 Dollar figures from different points in time do not represent a valid comparison of purchasing power. Therefore, to compare a dollar figure from the past to a dollar figure today, the older figure should be inflated using a ________. Price index ...
Sunspots and perceptions in consumer expectations
... news reports whose interpretations of underlying information are used to update expectations. These explanations are firmly rooted in economics, in the sense that the rigidities are caused by costs and incentives, and lead to asymptotically rational forecasts. This paper connects to the animal spiri ...
... news reports whose interpretations of underlying information are used to update expectations. These explanations are firmly rooted in economics, in the sense that the rigidities are caused by costs and incentives, and lead to asymptotically rational forecasts. This paper connects to the animal spiri ...
Chap23
... • An increase in the expected price level reduces the quantity of goods and services supplied and shifts the short-run aggregate supply curve to the left. • A decrease in the expected price level raises the quantity of goods and services supplied and shifts the short-run aggregate supply curve to th ...
... • An increase in the expected price level reduces the quantity of goods and services supplied and shifts the short-run aggregate supply curve to the left. • A decrease in the expected price level raises the quantity of goods and services supplied and shifts the short-run aggregate supply curve to th ...
Inflation-Indexed Securities: Description and Market Experience
... saving or a diversification of existing assets (accomplished by shifting away from other forms of savings, such as stocks or bonds). Diversification of savings into a new instrument would be welcome, as it reduces an individual’s exposure to any single risk. ...
... saving or a diversification of existing assets (accomplished by shifting away from other forms of savings, such as stocks or bonds). Diversification of savings into a new instrument would be welcome, as it reduces an individual’s exposure to any single risk. ...
Chapter 18
... •In July 2012, the Fed lowered its forecasts for economic growth. •In determining monetary policy, the Fed’s forecasts of future economic growth are crucial. •The Fed knows that changes in interest rates and the money supply affect the economy with a lag, so policies it implements today will not hav ...
... •In July 2012, the Fed lowered its forecasts for economic growth. •In determining monetary policy, the Fed’s forecasts of future economic growth are crucial. •The Fed knows that changes in interest rates and the money supply affect the economy with a lag, so policies it implements today will not hav ...
NBER WORKING PAPER SERIES ADJUSTING DEPRECIATION IN AN INFLATIONARY
... With the existing "historic cost" method of depreciation, higher inflation rates reduce the real value of future depreciationdeductions and therefore raise the real net cost of investment. The calculations in this paper show that this rise in the net cost can be quite substantial at recent inflation ...
... With the existing "historic cost" method of depreciation, higher inflation rates reduce the real value of future depreciationdeductions and therefore raise the real net cost of investment. The calculations in this paper show that this rise in the net cost can be quite substantial at recent inflation ...
Ch15.aggregate demand - Emporia State University
... THE AGGREGATE-SUPPLY CURVE • In the long run, an economy’s production of goods and services depends on its supplies of labor, capital, and natural resources and on the available technology used to turn these factors of production into goods and services. • The price level does not affect these varia ...
... THE AGGREGATE-SUPPLY CURVE • In the long run, an economy’s production of goods and services depends on its supplies of labor, capital, and natural resources and on the available technology used to turn these factors of production into goods and services. • The price level does not affect these varia ...
chapter 11
... Consider an economy that produces only cell phones. In the year 2012, the economy manufactures 275 cell phones, and each cell phone sells at $200. In the year 2013, the economy manufactures 280 cell phones but the price of each cell phone falls to $180. 3) Refer to the scenario above. What is the n ...
... Consider an economy that produces only cell phones. In the year 2012, the economy manufactures 275 cell phones, and each cell phone sells at $200. In the year 2013, the economy manufactures 280 cell phones but the price of each cell phone falls to $180. 3) Refer to the scenario above. What is the n ...
Chapter 22 - Samuel Moon Jung
... slopes down with respect to the inflation rate. Be sure to discuss two channels through which changes in inflation rates affect demand. Answer: A fall in the inflation rate lowers real interest rates. Lower rates increase investment, thereby increasing aggregate demand. Lower interest rates also cau ...
... slopes down with respect to the inflation rate. Be sure to discuss two channels through which changes in inflation rates affect demand. Answer: A fall in the inflation rate lowers real interest rates. Lower rates increase investment, thereby increasing aggregate demand. Lower interest rates also cau ...
NBER WORKING PAPER SERIES OPTIMAL FISCAL AND MONETARY POLICY EXPANDED VERSION
... differentiated across different sources of income, and the short-term nominal interest rate. Public debt is assumed to be nominal and non-state contingent. A key finding of the paper is that price stability appears to be a central goal of optimal monetary policy. The optimal rate of inflation under ...
... differentiated across different sources of income, and the short-term nominal interest rate. Public debt is assumed to be nominal and non-state contingent. A key finding of the paper is that price stability appears to be a central goal of optimal monetary policy. The optimal rate of inflation under ...
Ch22
... 3. Suppose that government spending is raised at the same time that the money supply is lowered. What will happen to the position of the aggregate demand curve? 4. Why does the aggregate demand curve shift when "animal spirits" change? 5. If the dollar increases in value relative to foreign currenci ...
... 3. Suppose that government spending is raised at the same time that the money supply is lowered. What will happen to the position of the aggregate demand curve? 4. Why does the aggregate demand curve shift when "animal spirits" change? 5. If the dollar increases in value relative to foreign currenci ...
The Economic Determinants of US Presidential Approval Ratings
... while both inflation and unemployment are statistically significant variables in determining presidential approval, they are not economically or practically significant. Indeed, all of the common macroeconomic variables discussed so often in the news are of little or no importance in determining a p ...
... while both inflation and unemployment are statistically significant variables in determining presidential approval, they are not economically or practically significant. Indeed, all of the common macroeconomic variables discussed so often in the news are of little or no importance in determining a p ...
Monetary policy trade-offs and forward guidance
... breached, would mean that the guidance would no longer apply: first, if in the MPC’s view, it is more likely than not that CPI inflation 18 to 24 months ahead will be at least half a percentage point above the 2% target; and second, if medium-term inflation expectations no longer remain sufficiently ...
... breached, would mean that the guidance would no longer apply: first, if in the MPC’s view, it is more likely than not that CPI inflation 18 to 24 months ahead will be at least half a percentage point above the 2% target; and second, if medium-term inflation expectations no longer remain sufficiently ...
A Literature Overview of the Central Bank’s Knowledge Transparency M. Haluk GÜLER
... economy reduce the potential output below the socially optimal level. In this framework, the assumed timing of events implies that the central bank is in some way able to respond flexibly to disturbances in the economy since the public is unable to change its economic actions in the short term. Hen ...
... economy reduce the potential output below the socially optimal level. In this framework, the assumed timing of events implies that the central bank is in some way able to respond flexibly to disturbances in the economy since the public is unable to change its economic actions in the short term. Hen ...
Price Measurement Paper - Statistics New Zealand
... concept of ‘intermediate consumption’ (that is, the goods and services used up in the production process). One of the major costs of production for any business unit are the wages and salaries of the employees engaged in the production process, and these costs are not included in the scope of the in ...
... concept of ‘intermediate consumption’ (that is, the goods and services used up in the production process). One of the major costs of production for any business unit are the wages and salaries of the employees engaged in the production process, and these costs are not included in the scope of the in ...
Comprehensive Assessment: Developments in Economic Activity
... inflation expectations -- after having been largely flat -- weakened, reflecting the fact that expectations formation in Japan is largely adaptive, that is, backward-looking. There are several ways to gauge inflation expectations, including market indicators estimated, for example, using the yields ...
... inflation expectations -- after having been largely flat -- weakened, reflecting the fact that expectations formation in Japan is largely adaptive, that is, backward-looking. There are several ways to gauge inflation expectations, including market indicators estimated, for example, using the yields ...
NBER WORKING PAPER SERIES THE CONQUEST OF SOUTH AMERICAN INFLATION Thomas Sargent
... to the higher π1∗ , but the higher fixed point π2∗ is lower and thus it will be easier for beliefs to escape. To make this explanation fit together, Marcet and Nicolini (2003) supplemented the basic model of Marcet and Sargent (1989b) with a story about mechanical reforms that end an escape episode ...
... to the higher π1∗ , but the higher fixed point π2∗ is lower and thus it will be easier for beliefs to escape. To make this explanation fit together, Marcet and Nicolini (2003) supplemented the basic model of Marcet and Sargent (1989b) with a story about mechanical reforms that end an escape episode ...
2 - Economics | Bilkent University
... To summarize, currency depreciation increases net exports and increases the cost of production. Similarly, currency appreciation decreases net exports and the cost of production. The combined effects of demand and supply channels determine the net results of exchange rate fluctuations on real outpu ...
... To summarize, currency depreciation increases net exports and increases the cost of production. Similarly, currency appreciation decreases net exports and the cost of production. The combined effects of demand and supply channels determine the net results of exchange rate fluctuations on real outpu ...
Mankiw: Brief Principles of Macroeconomics, Second Edition
... the $10 billion increase in G still raised the GDP by $50 billion. Would the MPC be larger or smaller than 0.8? Crowding-out is the drop of investment spending because of an increase in interest rates as a result of G increase. As I falls, so does AD and GDP. If GDP rose by $50 billion, then the mul ...
... the $10 billion increase in G still raised the GDP by $50 billion. Would the MPC be larger or smaller than 0.8? Crowding-out is the drop of investment spending because of an increase in interest rates as a result of G increase. As I falls, so does AD and GDP. If GDP rose by $50 billion, then the mul ...
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.