The Phillips Curve A
... When the Fed slows the rate of money growth, it contracts aggregate demand. This reduces the quantity of goods and services that firms produce. This leads to a rise in unemployment. ...
... When the Fed slows the rate of money growth, it contracts aggregate demand. This reduces the quantity of goods and services that firms produce. This leads to a rise in unemployment. ...
Hanke - 1 The Fed: The Great Enabler By
... Before leaving the market-specific bubbles, two points merit mention. First, the relative increase in housing prices was clearly signaling a bubble in which prices were diverging from housing’s fundamentals. A simple “back-of-the-envelope” calculation confirms a bubble. The so-called demographic “de ...
... Before leaving the market-specific bubbles, two points merit mention. First, the relative increase in housing prices was clearly signaling a bubble in which prices were diverging from housing’s fundamentals. A simple “back-of-the-envelope” calculation confirms a bubble. The so-called demographic “de ...
Figure 8-12 Responses of the Inflation Rate (p)
... continuous inflation. Along the SP curve, the economy is not in a long run equilibrium because the price level is constantly racing ahead of the nominal wage rage. There will be continuous pressures for higher wages. As labor contracts fail to anticipate further inflation, and as a result they fai ...
... continuous inflation. Along the SP curve, the economy is not in a long run equilibrium because the price level is constantly racing ahead of the nominal wage rage. There will be continuous pressures for higher wages. As labor contracts fail to anticipate further inflation, and as a result they fai ...
aggregate demand-aggregate supply model
... The aggregate supply curve is upward-sloping in the MEDIUM-RUN, i.e. an increase in the price level (P) will increase the quantity of goods and services produced (Q). An increase in the price level means that producers are receiving higher prices on average for the products they sell. Other things c ...
... The aggregate supply curve is upward-sloping in the MEDIUM-RUN, i.e. an increase in the price level (P) will increase the quantity of goods and services produced (Q). An increase in the price level means that producers are receiving higher prices on average for the products they sell. Other things c ...
Martin Feldstein DEFLATION
... indicates that discretionary fiscal policy is not useful in dealing with the typical short recession downturn, a discretionary fiscal stimulus may be appropriate when faced with a long-term weakness of the type experienced now in Japan or with anticipated deflation. Contrary to the usual assumption, ...
... indicates that discretionary fiscal policy is not useful in dealing with the typical short recession downturn, a discretionary fiscal stimulus may be appropriate when faced with a long-term weakness of the type experienced now in Japan or with anticipated deflation. Contrary to the usual assumption, ...
Page 1
... policy may create inflation because it over stimulates the economy . This problem has led some economists to recommend policy rules . Examples of policy rules are that money supply should grow at 5 percent a year and nominal GDP should grow at 6 percent a year . Ther’s a second reason why understand ...
... policy may create inflation because it over stimulates the economy . This problem has led some economists to recommend policy rules . Examples of policy rules are that money supply should grow at 5 percent a year and nominal GDP should grow at 6 percent a year . Ther’s a second reason why understand ...
Chapter 20 – Practice Questions 1. Which of the following is correct
... b. They are associated with comparatively large declines in investment spending. c. They are any period when real GDP growth is less than average. d. They tend to be associated with falling unemployment rates. ...
... b. They are associated with comparatively large declines in investment spending. c. They are any period when real GDP growth is less than average. d. They tend to be associated with falling unemployment rates. ...
with Personal Statements of
... external reserves which stood at US$49.13 billion as at May 16, 2013. This represents an increase of US$5.3 billion or 12.1 per cent above the level of US$43.83 billion at end-December 2012. This level of reserves could finance approximately 13 months of import. The Committee’s Considerations The Co ...
... external reserves which stood at US$49.13 billion as at May 16, 2013. This represents an increase of US$5.3 billion or 12.1 per cent above the level of US$43.83 billion at end-December 2012. This level of reserves could finance approximately 13 months of import. The Committee’s Considerations The Co ...
a.s 3.4 - GHEconomics
... In groups give an opinion into how well GDP is as a measure of the standard of living. ...
... In groups give an opinion into how well GDP is as a measure of the standard of living. ...
Macroeconomics - Mr. Fenn
... good whose inherent value serves as the value of money – gold or silver being one good example. Fiat money is a good whose value is less than the value of money it represents – paper money, for instance. Bank money consists of accounting credits that can be drawn on by the depositor – checking accou ...
... good whose inherent value serves as the value of money – gold or silver being one good example. Fiat money is a good whose value is less than the value of money it represents – paper money, for instance. Bank money consists of accounting credits that can be drawn on by the depositor – checking accou ...
Unit 3: Aggregate Demand and Supply and Fiscal Policy
... of money • This decreases the quantity of expenditures • Lower price levels increase purchasing power and increase expenditures Example: • If the balance in your bank was $50,000, but inflation erodes your purchasing power, you will likely reduce your spending. • So…Price Level goes up, GDP demanded ...
... of money • This decreases the quantity of expenditures • Lower price levels increase purchasing power and increase expenditures Example: • If the balance in your bank was $50,000, but inflation erodes your purchasing power, you will likely reduce your spending. • So…Price Level goes up, GDP demanded ...
Quiz: Homework 11
... A. There will be a decrease in aggregate demand. B. There will be no change in aggregate demand C. There will be an increase in aggregate demand. D. There is not enough information to determine the impact on aggregate demand. Answer: C 23. Against which variables is the Solow growth curve plotted? ...
... A. There will be a decrease in aggregate demand. B. There will be no change in aggregate demand C. There will be an increase in aggregate demand. D. There is not enough information to determine the impact on aggregate demand. Answer: C 23. Against which variables is the Solow growth curve plotted? ...
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.