Is Deflation a Risk For Greece?
... A representation of different explanations of deflation in an ISLM framework is given in Box 1. It should be noted that the several causes of deflation can feedback to each other. For example, a fall in demand and an ensuing supply glut can lead to closure of businesses, which see prices not coverin ...
... A representation of different explanations of deflation in an ISLM framework is given in Box 1. It should be noted that the several causes of deflation can feedback to each other. For example, a fall in demand and an ensuing supply glut can lead to closure of businesses, which see prices not coverin ...
The Role of Demand Management Policies in Reducing
... unemployment rates cannot be explained either by cyclical factorsthe degree of nominal inertia is just not high enough to explain the sustained increase in unemployment--or by exogenous shifts on the supply side. In regard to the latter, the effects of the deterioration in the terms of trade followi ...
... unemployment rates cannot be explained either by cyclical factorsthe degree of nominal inertia is just not high enough to explain the sustained increase in unemployment--or by exogenous shifts on the supply side. In regard to the latter, the effects of the deterioration in the terms of trade followi ...
Alternative Perspectives on Stabilization Policy
... they influence all sorts of behavior. For instance, households decide how much to consume based on how much they expect to earn in the future, and firms decide how much to invest based on their expectations of future profitability. These expectations depend on many things, but one factor, according ...
... they influence all sorts of behavior. For instance, households decide how much to consume based on how much they expect to earn in the future, and firms decide how much to invest based on their expectations of future profitability. These expectations depend on many things, but one factor, according ...
Government Maturity Structure Shocks Alexandre Corhay Howard Kung Gonzalo Morales
... the PM/AF regime, maturity restructuring operations, holding market value constant, leave the government discount rate unchanged, and, therefore, inflation and real variables are unaffected. Further, when the yield curve is nonzero in the AM/PF (monetary-led regime) without policy regime shifts, mat ...
... the PM/AF regime, maturity restructuring operations, holding market value constant, leave the government discount rate unchanged, and, therefore, inflation and real variables are unaffected. Further, when the yield curve is nonzero in the AM/PF (monetary-led regime) without policy regime shifts, mat ...
Is this money?
... “Sticky Prices” • The classical model assume that producers respond to increases in money by instantly raising their prices. Suppose that it is costly to raise prices (menu costs) • Therefore, when the fed increases the money supply, producers respond to this increase in demand by increasing produc ...
... “Sticky Prices” • The classical model assume that producers respond to increases in money by instantly raising their prices. Suppose that it is costly to raise prices (menu costs) • Therefore, when the fed increases the money supply, producers respond to this increase in demand by increasing produc ...
AP 宏觀經濟學講義
... the equilibrium interest rate, how the investment demand curve provides the link between changes in the interest rate and changes in aggregate demand, and how changes in aggregate demand affect real output and price level. Students should have an understanding of financial markets and the working of ...
... the equilibrium interest rate, how the investment demand curve provides the link between changes in the interest rate and changes in aggregate demand, and how changes in aggregate demand affect real output and price level. Students should have an understanding of financial markets and the working of ...
Download PDF
... become more flexible over this period, controlling for inflation. We show that a simple menu cost model with a fixed menu cost over the entire sample period can match the empirical relationship between the frequency of price change and inflation. Menu costs are, of course, a veil for a variety of de ...
... become more flexible over this period, controlling for inflation. We show that a simple menu cost model with a fixed menu cost over the entire sample period can match the empirical relationship between the frequency of price change and inflation. Menu costs are, of course, a veil for a variety of de ...
Lecture 6 - University of Wyoming
... AS is shifted by changes in input prices, productivity, or business taxes. AD is shifted by expectations or government action (expansionary fiscal or monetary policy). Rightward shifts in AD or AS can cause a recession (reduced output and cyclical unemployment). In the case of a recession, the gover ...
... AS is shifted by changes in input prices, productivity, or business taxes. AD is shifted by expectations or government action (expansionary fiscal or monetary policy). Rightward shifts in AD or AS can cause a recession (reduced output and cyclical unemployment). In the case of a recession, the gover ...
paper - Pascal Michaillat
... the long queues of customers, thus fueling high inflation. Monetary policy is described by an interest-rate rule that describes how monetary policy responds to inflation and unemployment. The Taylor principle remains valid in our model: when the response to inflation and unemployment is strong enoug ...
... the long queues of customers, thus fueling high inflation. Monetary policy is described by an interest-rate rule that describes how monetary policy responds to inflation and unemployment. The Taylor principle remains valid in our model: when the response to inflation and unemployment is strong enoug ...
2004] legal measures of inflation 1 The Price of Macroeconomic
... Consumer Price Index Versus Implicit Price Deflator ....................................................................... 40 C. Madness in Their Methods............................................... 46 1. Index depth............................................................ 47 2. Fixed market b ...
... Consumer Price Index Versus Implicit Price Deflator ....................................................................... 40 C. Madness in Their Methods............................................... 46 1. Index depth............................................................ 47 2. Fixed market b ...
chapter 4 aggregate demand and aggregate supply
... focuses on the economy as a whole, rather than on individual economic behavior. Macroeconomists typically address such questions as why there are periods of recession and inflation, what causes prosperity, and what causes economic growth. Some of the concepts used by macroeconomists to measure chang ...
... focuses on the economy as a whole, rather than on individual economic behavior. Macroeconomists typically address such questions as why there are periods of recession and inflation, what causes prosperity, and what causes economic growth. Some of the concepts used by macroeconomists to measure chang ...
This PDF is a selection from an out-of-print volume from... of Economic Research
... Darby 1975; Feldstein 1976; Feldstein, Green, and Sheshinski 1978;Auerbach 1981; Gordon 1984).Indeed, a substantial body of research has concluded that one of the most important channels through which a change in the anticipated rate of price inflation can affect real economic activity is a nominal- ...
... Darby 1975; Feldstein 1976; Feldstein, Green, and Sheshinski 1978;Auerbach 1981; Gordon 1984).Indeed, a substantial body of research has concluded that one of the most important channels through which a change in the anticipated rate of price inflation can affect real economic activity is a nominal- ...
29.3 aggregate demand
... An increase in expected future income increases the amount of consumption goods that people plan to buy today and increases aggregate demand. An increase in expected future inflation increases aggregate demand today because people decide to buy more goods and services before their prices rise. An in ...
... An increase in expected future income increases the amount of consumption goods that people plan to buy today and increases aggregate demand. An increase in expected future inflation increases aggregate demand today because people decide to buy more goods and services before their prices rise. An in ...
13.2 aggregate demand
... quantity of real GDP demanded and the price level when all other influences on expenditure plans remain the same. Other things remaining the same, • When the price level rises, the quantity of real GDP demanded decreases. • When the price level falls, the quantity of real GDP demanded increases. ...
... quantity of real GDP demanded and the price level when all other influences on expenditure plans remain the same. Other things remaining the same, • When the price level rises, the quantity of real GDP demanded decreases. • When the price level falls, the quantity of real GDP demanded increases. ...
The Aggregate Supply Curve
... In the medium run, the increase in nominal money is reflected entirely in a proportional increase in the price level. The neutrality of money refers to the fact that an increase in the nominal money stock has no effect on output or the interest rate in the medium run. The increase in the nominal m ...
... In the medium run, the increase in nominal money is reflected entirely in a proportional increase in the price level. The neutrality of money refers to the fact that an increase in the nominal money stock has no effect on output or the interest rate in the medium run. The increase in the nominal m ...
Download paper (PDF)
... of consumption to the shock is therefore quite large and gets larger the further in the future the interest rate shocks occurs. It is the cumulative response of consumption (with some discounting) that determines the response of current inflation in the basic New Keynesian model. So, the further in ...
... of consumption to the shock is therefore quite large and gets larger the further in the future the interest rate shocks occurs. It is the cumulative response of consumption (with some discounting) that determines the response of current inflation in the basic New Keynesian model. So, the further in ...
Inflation and the Housing Market
... rate of inflation tend to lead to corresponding fluctuations in construction activity rests on the following considerations which are spelled out in the rest of this section. 1. Inflation and the anticipation of its continuation tends to raise interest rates, including mortgage rates, by an "inflati ...
... rate of inflation tend to lead to corresponding fluctuations in construction activity rests on the following considerations which are spelled out in the rest of this section. 1. Inflation and the anticipation of its continuation tends to raise interest rates, including mortgage rates, by an "inflati ...
- Munich Personal RePEc Archive
... The constant and the time variables also have an impact on ExUR during and after a recession. To more clearly see how the model says the unemployment rate reacts to a recessionary drop in NGAP, Figure 4 shows model simulations of two scenarios: (i) a 1% quarterly drop in NGAP for four quarters and t ...
... The constant and the time variables also have an impact on ExUR during and after a recession. To more clearly see how the model says the unemployment rate reacts to a recessionary drop in NGAP, Figure 4 shows model simulations of two scenarios: (i) a 1% quarterly drop in NGAP for four quarters and t ...
12INFLATION*
... Inflation is defined as a continuing increase in the prices of specific products. the wages of all workers. the price level. money GDP. ...
... Inflation is defined as a continuing increase in the prices of specific products. the wages of all workers. the price level. money GDP. ...
Core Inflation: Concepts, Uses and Measurement
... Quah and Vahey’s and Eckstein’s definitions have quite different implications for the properties of core and non-core inflation. In the Quah and Vahey definition, the difference between core inflation and non-core inflation is essentially the difference between anticipated and unanticipated inflatio ...
... Quah and Vahey’s and Eckstein’s definitions have quite different implications for the properties of core and non-core inflation. In the Quah and Vahey definition, the difference between core inflation and non-core inflation is essentially the difference between anticipated and unanticipated inflatio ...
Aggregate demand and supply
... The AD/price level relationship is illustrated in figure 10.1. Total spending on real output (aggregate demand) is dependent on the price level. The AD/AS model is more powerful than the Keynesian model developed in the last chapter - the AD/ AS model brings in changes in the price level (inflation) ...
... The AD/price level relationship is illustrated in figure 10.1. Total spending on real output (aggregate demand) is dependent on the price level. The AD/AS model is more powerful than the Keynesian model developed in the last chapter - the AD/ AS model brings in changes in the price level (inflation) ...
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.