The Macroeconomic Environment
... i.e., bond prices will soon be rising. Wealth-max. strategy - buy bonds now. MD At “low” interest rates, we expect them to rise … i.e., bond prices will soon be falling. Wealth-max strategy - sell bonds now. MD Changes in MS will change i and that will change I. ...
... i.e., bond prices will soon be rising. Wealth-max. strategy - buy bonds now. MD At “low” interest rates, we expect them to rise … i.e., bond prices will soon be falling. Wealth-max strategy - sell bonds now. MD Changes in MS will change i and that will change I. ...
year 1 macroeconomic objectives - inflation
... 4. The CPI excludes this cost whereas the RPI includes it 6. The weights used in the CPI are determined using the Family _________ Survey 7. The type of mean calculated when measuring the Consumer Price Index 9. A fall in the general level of prices 12. Demand pull inflation is more likely to occur ...
... 4. The CPI excludes this cost whereas the RPI includes it 6. The weights used in the CPI are determined using the Family _________ Survey 7. The type of mean calculated when measuring the Consumer Price Index 9. A fall in the general level of prices 12. Demand pull inflation is more likely to occur ...
MONETARY POLICY BUSINESS CYCLE Beryl W. Sprinkel
... these activities may be to an individual operating in an inflationary environment, all such activities are a waste of society’s economic resources, compared to an environment of price stability which would render these activities unnecessary. Therefore, inflation essentially limits potential real gr ...
... these activities may be to an individual operating in an inflationary environment, all such activities are a waste of society’s economic resources, compared to an environment of price stability which would render these activities unnecessary. Therefore, inflation essentially limits potential real gr ...
Inflation - Oldfield Economics
... Inflation is a sustained increase in the general level of prices Inflation rate is the annual % change in prices A fall in inflation means that prices are rising but at a slower rate than before. When prices rise, the real purchasing power of cash declines Deflation on the other hand is a sustained ...
... Inflation is a sustained increase in the general level of prices Inflation rate is the annual % change in prices A fall in inflation means that prices are rising but at a slower rate than before. When prices rise, the real purchasing power of cash declines Deflation on the other hand is a sustained ...
FedViews
... There also is unprecedented slack in the labor markets. Considering the official unemployment rate plus the number of workers who are employed part-time involuntarily for economic reasons, the overall measured slack is in excess of the 1982 recession. Moreover, we foresee this measure rising even hi ...
... There also is unprecedented slack in the labor markets. Considering the official unemployment rate plus the number of workers who are employed part-time involuntarily for economic reasons, the overall measured slack is in excess of the 1982 recession. Moreover, we foresee this measure rising even hi ...
Thinking like an economist - Pearson Schools and FE Colleges
... Figures suggest that over the past 40 years, the UK has experienced four major recessions. The first two, in 1974-75 and 1980-81, shown in Figure 12, were caused mainly by supply side shocks. Sharp rises in world oil prices helped fuel UK inflation. Industrial unrest also saw large wage increases fo ...
... Figures suggest that over the past 40 years, the UK has experienced four major recessions. The first two, in 1974-75 and 1980-81, shown in Figure 12, were caused mainly by supply side shocks. Sharp rises in world oil prices helped fuel UK inflation. Industrial unrest also saw large wage increases fo ...
Development Economics – Econ 682
... Moral hazard: The risk associated with a loan in which the borrower has incentives to invest in projects with high risk where the borrower does well if the project succeeds but the lender bears most of the loss if the project fails. The prospect of “bail out” of failed projects by, for example, the ...
... Moral hazard: The risk associated with a loan in which the borrower has incentives to invest in projects with high risk where the borrower does well if the project succeeds but the lender bears most of the loss if the project fails. The prospect of “bail out” of failed projects by, for example, the ...
Professor`s Name
... relative to costs. The negative side of this is that even though real GDP went up from $2,330.36 to $2,361.72, consumption fell from $1,127.21 to $1,106.82 and investment went down significantly from $265.15 to $119.30. Even with the expanded money supply, the higher interest rate (10.009% compared ...
... relative to costs. The negative side of this is that even though real GDP went up from $2,330.36 to $2,361.72, consumption fell from $1,127.21 to $1,106.82 and investment went down significantly from $265.15 to $119.30. Even with the expanded money supply, the higher interest rate (10.009% compared ...
Eco 200 – Principles of Macroeconomics
... The inflation rate is measured by changes in the Consumer Price Index (CPI). The CPI is an index that measures the quarterly changes in the prices of a selected weighted basket of consumer goods and services. The basket includes a wide range of goods and services purchased by households, such as foo ...
... The inflation rate is measured by changes in the Consumer Price Index (CPI). The CPI is an index that measures the quarterly changes in the prices of a selected weighted basket of consumer goods and services. The basket includes a wide range of goods and services purchased by households, such as foo ...
ECON366 - KONSTANTINOS KANELLOPOULOS
... 2. Comment on the following statement: “If we assume that people have rational expectations, then fiscal policy is always irrelevant. But monetary policy can still be used to affect the rate of inflation and unemployment.” Individuals and firms with rational expectations consistently make optimal de ...
... 2. Comment on the following statement: “If we assume that people have rational expectations, then fiscal policy is always irrelevant. But monetary policy can still be used to affect the rate of inflation and unemployment.” Individuals and firms with rational expectations consistently make optimal de ...
Slide_6-1
... x It creates economic uncertainty. Consumers, firms and governments will be uncertain about their future costs and the impact rising inflation could have on their incomes and revenues. Firms may cut their investment and consumers their spending Stagflation: an economic situation when unemployment an ...
... x It creates economic uncertainty. Consumers, firms and governments will be uncertain about their future costs and the impact rising inflation could have on their incomes and revenues. Firms may cut their investment and consumers their spending Stagflation: an economic situation when unemployment an ...
IGCSE®/O Level Economics - Liceo Ginnasio Statale «Virgilio
... x It creates economic uncertainty. Consumers, firms and governments will be uncertain about their future costs and the impact rising inflation could have on their incomes and revenues. Firms may cut their investment and consumers their spending Stagflation: an economic situation when unemployment an ...
... x It creates economic uncertainty. Consumers, firms and governments will be uncertain about their future costs and the impact rising inflation could have on their incomes and revenues. Firms may cut their investment and consumers their spending Stagflation: an economic situation when unemployment an ...
Economic Study Notes Inflation - The description of inflation
... nominal wages are unable to keep up with the rate of inflation – real incomes and subsequent purchasing power will fall. Individuals whose incomes rise faster than the rate of inflation experience an increase in real incomes Income distribution becomes more unequal than before inflation. Speculators ...
... nominal wages are unable to keep up with the rate of inflation – real incomes and subsequent purchasing power will fall. Individuals whose incomes rise faster than the rate of inflation experience an increase in real incomes Income distribution becomes more unequal than before inflation. Speculators ...
Chpt 13 PP
... A rise in the general price level resulting from an increase in the cost of production ...
... A rise in the general price level resulting from an increase in the cost of production ...
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.