12INFLATION*
... PHILLIPS CURVE : The Phillips curve and the AS/AD model are closely linked. Consider an unexpected increase in aggregate demand. In the short run, a movement occurs along the SAS curve. The price level rises, and real GDP increases above potential GDP. The rise in the price level means that inflatio ...
... PHILLIPS CURVE : The Phillips curve and the AS/AD model are closely linked. Consider an unexpected increase in aggregate demand. In the short run, a movement occurs along the SAS curve. The price level rises, and real GDP increases above potential GDP. The rise in the price level means that inflatio ...
Unemployed
... Inflation is a sustained rise in the general level of prices of all goods and services. It is one of the 3 major macroeconomic variables (output and unemployment being the other 2) that is of concern to economists and policymakers. Inflation is a problem because it causes the purchasing power (or th ...
... Inflation is a sustained rise in the general level of prices of all goods and services. It is one of the 3 major macroeconomic variables (output and unemployment being the other 2) that is of concern to economists and policymakers. Inflation is a problem because it causes the purchasing power (or th ...
KW2_Ch08_FINAL
... 7. The natural rate of unemployment changes over time. 8. Policy makers worry about inflation as well as unemployment. 9. Inflation does not, as many assume, make everyone poorer by raising the level of prices. That's because wages and incomes are adjusted to take into account a rising price level, ...
... 7. The natural rate of unemployment changes over time. 8. Policy makers worry about inflation as well as unemployment. 9. Inflation does not, as many assume, make everyone poorer by raising the level of prices. That's because wages and incomes are adjusted to take into account a rising price level, ...
FROM STANDARD TO David I. Fand A RANDOM-WALK MONETARY
... in the OPEC cartel hold down and suppress pressures that would otherwise be reflected in a rising inflation rate. A second factor that has been helpful in holding down the inflation rate is the commodity supply revolution. There has been a significant revolution—increasing supply—throughout the worl ...
... in the OPEC cartel hold down and suppress pressures that would otherwise be reflected in a rising inflation rate. A second factor that has been helpful in holding down the inflation rate is the commodity supply revolution. There has been a significant revolution—increasing supply—throughout the worl ...
Chapter 14 Monetary Policy
... relative to their customer deposits. 1. Raising the reserve ratio increases required reserves and shrinks excess reserves. Any loss of excess reserves shrinks banks’ lending ability and, therefore, the potential money supply by a multiple amount of the change in excess reserves. 2. Lowering the rese ...
... relative to their customer deposits. 1. Raising the reserve ratio increases required reserves and shrinks excess reserves. Any loss of excess reserves shrinks banks’ lending ability and, therefore, the potential money supply by a multiple amount of the change in excess reserves. 2. Lowering the rese ...
Gross Domestic Product
... • Figure 2.1 plots national saving, private saving, and government saving relative to GDP ...
... • Figure 2.1 plots national saving, private saving, and government saving relative to GDP ...
NBER WORKING PAPER SERIES CHOOSING THE FEDERAL RESERVE CHAIR: LESSONS FROM HISTORY
... by the fact that they had sold earning assets rather than reduce their balances with correspondents” (Minutes, 4/3/37, p. 7). Bank lending declined and the money supply fell sharply in the wake of the increases in reserve requirements. Figure 1 shows the behavior of the unemployment rate starting in ...
... by the fact that they had sold earning assets rather than reduce their balances with correspondents” (Minutes, 4/3/37, p. 7). Bank lending declined and the money supply fell sharply in the wake of the increases in reserve requirements. Figure 1 shows the behavior of the unemployment rate starting in ...
Bank of England Inflation Report February 2015
... The outlook for oil prices will depend, in part, on why they have fallen. Oil prices reflect current and expected oil supply and demand. The fall in oil prices since mid-2014 is likely in large part to reflect an increase in oil supply growth (Chart 4.5). Production has been unexpectedly high in Lib ...
... The outlook for oil prices will depend, in part, on why they have fallen. Oil prices reflect current and expected oil supply and demand. The fall in oil prices since mid-2014 is likely in large part to reflect an increase in oil supply growth (Chart 4.5). Production has been unexpectedly high in Lib ...
Modeling Price Level Targeting with an Escape Clause and Lessons
... First, the convenient assumption of quadratic preferences may be wrong. If welfare costs rise faster than the quadratic as variables deviate increasingly from their targets, then linear feedback rules would no longer be optimal. If welfare costs approached infinity as unemployment rose above a certa ...
... First, the convenient assumption of quadratic preferences may be wrong. If welfare costs rise faster than the quadratic as variables deviate increasingly from their targets, then linear feedback rules would no longer be optimal. If welfare costs approached infinity as unemployment rose above a certa ...
Focus Germany: Solid growth, low inflation
... production exceeded the level reached in the last four months of 2013 by 2.4% in real terms. In a year-over-year comparison, output was even 8% higher between January and April. German carmakers are benefiting from rekindled demand from western Europe and the ongoing strength of the US and Chinese c ...
... production exceeded the level reached in the last four months of 2013 by 2.4% in real terms. In a year-over-year comparison, output was even 8% higher between January and April. German carmakers are benefiting from rekindled demand from western Europe and the ongoing strength of the US and Chinese c ...
Aggregate Supply
... If the relative price of wheat is high, the farmer is motivated to work hard and produce more wheat, because the reward is great. If the relative price of wheat is low, she prefers to enjoy more leisure and produce less wheat. Unfortunately, when the farmer makes her production decision, she does no ...
... If the relative price of wheat is high, the farmer is motivated to work hard and produce more wheat, because the reward is great. If the relative price of wheat is low, she prefers to enjoy more leisure and produce less wheat. Unfortunately, when the farmer makes her production decision, she does no ...
Optimal Monetary Policy in a Currency Area
... and to conduct monetary policy within that area. A different institution conducts fiscal policy. But whereas there is a common central bank, different fiscal authorities can be assigned to different regions. The simplest form of a currency area that is of interest for our analysis is a two-region area ...
... and to conduct monetary policy within that area. A different institution conducts fiscal policy. But whereas there is a common central bank, different fiscal authorities can be assigned to different regions. The simplest form of a currency area that is of interest for our analysis is a two-region area ...
Social Conflict and the Effectiveness of Aggregate Demand
... marginal product received by individuals in such equilibria represents in some way their own contribution (that is, what they “deserve”). Thus, there is every reason to expect that individuals who are unhappy with market outcomes will seek to change them. Without special institutions to mediate conf ...
... marginal product received by individuals in such equilibria represents in some way their own contribution (that is, what they “deserve”). Thus, there is every reason to expect that individuals who are unhappy with market outcomes will seek to change them. Without special institutions to mediate conf ...
This PDF is a selection from a published volume from... Bureau of Economic Research
... Gauti Eggertsson’s paper, “What Fiscal Policy Is Effective at Zero Interest Rates?” addresses one of the classic questions in macroeconomics: what government policies should be used to fight deflation and depression? And over the years, there have been many proposed answers, including monetary easin ...
... Gauti Eggertsson’s paper, “What Fiscal Policy Is Effective at Zero Interest Rates?” addresses one of the classic questions in macroeconomics: what government policies should be used to fight deflation and depression? And over the years, there have been many proposed answers, including monetary easin ...
Fiscal Stimulus and Potential Inflationary Risks
... created by the RBI (i.e. net RBI credit to the Government), or through higher aggregate demand associated with an expansionary fiscal stance (which could increase growth in broad money). Empirical estimates of this paper conducted over the sample period 1953-2009 suggest that one percentage point in ...
... created by the RBI (i.e. net RBI credit to the Government), or through higher aggregate demand associated with an expansionary fiscal stance (which could increase growth in broad money). Empirical estimates of this paper conducted over the sample period 1953-2009 suggest that one percentage point in ...
The Labor Market, Unemployment, and Inflation
... supplied are brought into equilibrium by rising and falling wage rates. There should be no persistent unemployment above the frictional and structural amount. ...
... supplied are brought into equilibrium by rising and falling wage rates. There should be no persistent unemployment above the frictional and structural amount. ...
The Labor Market, Unemployment, and Inflation
... supplied are brought into equilibrium by rising and falling wage rates. There should be no persistent unemployment above the frictional and structural amount. ...
... supplied are brought into equilibrium by rising and falling wage rates. There should be no persistent unemployment above the frictional and structural amount. ...
The liquidity effect in a small open economy model
... only compatible with a small set parameterizations of preferences. We show that producing liquidity and overshooting effects requires large enough intertemporal substitution in consumption and complementarity between consumption and real balances. Such parameterizations lead to counterintuitive dome ...
... only compatible with a small set parameterizations of preferences. We show that producing liquidity and overshooting effects requires large enough intertemporal substitution in consumption and complementarity between consumption and real balances. Such parameterizations lead to counterintuitive dome ...
Chapter 1
... flexible; in response to a change in market conditions, wages and prices adjust quickly to their new market-clearing levels. Keynesians believe that wages and prices are rigid or sticky; in response to changes in the economy, wages and prices adjust slowly to their new marketclearing levels. (b) Cla ...
... flexible; in response to a change in market conditions, wages and prices adjust quickly to their new market-clearing levels. Keynesians believe that wages and prices are rigid or sticky; in response to changes in the economy, wages and prices adjust slowly to their new marketclearing levels. (b) Cla ...
this PDF file - IUG Journal of Humanities and Social
... often variable rates of inflation. High and variable inflation is typically seen as a symptom or indicator of macroeconomic instability. This paper investigates the effect of inflation on the activity of banks, using secondary data from Ghana covering the period 1990 to 2010 and also a survey using ...
... often variable rates of inflation. High and variable inflation is typically seen as a symptom or indicator of macroeconomic instability. This paper investigates the effect of inflation on the activity of banks, using secondary data from Ghana covering the period 1990 to 2010 and also a survey using ...
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.