inflation
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Inflation is defined as a sustained increase in prices or a fall in the value of money. It occurs when the currency supply exceeds production levels. There are several causes of inflation, including demand-pull inflation which occurs when aggregate demand grows faster than potential output at full employment. Cost-push inflation happens when costs for firms increase, which they pass on to consumers. Printing more money can also cause inflation by increasing the money supply. Different theories attribute inflation to factors like market power, excess aggregate demand, or structural issues in the economy.
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Macro Economics: Phillips Curve, Inflation and Interest Rate
The document discusses the Phillips Curve, which describes the relationship between inflation and unemployment. It states that Phillips observed an inverse relationship between inflation and unemployment in the UK from 1861 to 1957. It then provides details on the contents of the Phillips Curve, including demand-pull and cost-push inflation. Finally, it explains the short-run and long-run Phillips Curves, noting that in the short-run there is a trade-off between inflation and unemployment, but in the long-run the natural unemployment rate is unchanged by inflation.
Inflation types and causes
Creeping inflation refers to a very low rise in prices like that of a snail or creeper. Moderate inflation occurs when prices rise moderately, while runway or galloping inflation describes rapidly rising prices at double or triple digit rates. The main theories of inflation are the quantity theory, demand pull theory, and cost push theory. The quantity theory states that too much money in the economy leads to inflation. Demand pull inflation occurs when aggregate demand increases more than supply, and cost push inflation happens when production costs rise, automatically increasing prices. Both monetary and fiscal measures can be used to reduce inflation.
Cause of inflation
The document discusses inflation, its definition as a general increase in price levels over time, and its causes. It identifies three main types of inflation: demand-pull inflation from increases in spending, cost-push inflation from drops in supply, and built-in inflation from past price and wage increases creating a spiral. The document was written by Ajeet Kumar Pandey in the batch SB2 on 08/01/2011 for an assignment on inflation and its causes.
Philip's Curve
The Phillips curve describes an inverse relationship between unemployment and inflation, such that lower unemployment is associated with higher inflation. While observed to be stable in the short-run, it does not hold in the long-run. The document discusses the origins of the Phillips curve from William Phillips' 1958 paper and subsequent modifications by economists like Friedman and Phelps who argued it does not reflect long-run economic realities. It also examines shifts to the Phillips curve from supply shocks and how the relationship between unemployment and inflation is now understood with incorporation of inflation expectations.
Chapter 7 - inflation ,unemployment and underemployment for BBA
This document defines various types of inflation including low inflation, galloping inflation, and hyperinflation. It also discusses different measures used to calculate inflation rates such as the Consumer Price Index (CPI) and Wholesale Price Index (WPI). Finally, it outlines several causes of inflation including demand-pull factors related to increases in the money supply according to the Quantity Theory of Money, and cost-push factors like increases in wages or costs of raw materials.
inflation
Inflation is defined as a general rise in prices for goods and services over time which results in a loss of purchasing power of a currency. Central banks aim to keep inflation within a target range to maintain economic stability. There are different types of inflation such as hyperinflation, which is a rapid rise in prices over 50% per month, and stagflation, which is stagnant economic growth combined with price inflation. Inflation can be caused by demand-pull factors like an increase in the money supply shifting aggregate demand curves out, or cost-push factors like increases in production costs shifting aggregate supply curves in. Effects of inflation include a redistribution of income and wealth between debtors and creditors, and losses for bond
Philips curve by nino bazhunaishvili
The document discusses the Phillips curve, which was developed by economist William Phillips and represents the inverse relationship between unemployment and inflation. It notes that Phillips found a consistent relationship in UK data from 1861-1957 where unemployment was high, wage growth was slow, and when unemployment was low, wages rose rapidly. The summary explains that the Phillips curve shows the tradeoff between inflation and unemployment, and how shifts in expected inflation or the natural unemployment rate cause the curve to shift positions.
Module 34 inflation and umemployment the phillips curve
The document discusses the Phillips curve, which shows the relationship between unemployment and inflation. It describes how Alban Phillips first observed an inverse relationship between wage growth and unemployment rates in Britain. Many economists then concluded there is a negative short-run relationship between unemployment and inflation rates, known as the short-run Phillips curve. However, changes in expected inflation rates can shift this curve. In the long run, policies aimed at reducing unemployment below the natural rate of unemployment lead to accelerating inflation.
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The document discusses the Phillips Curve, which describes the relationship between inflation and unemployment. It states that Phillips observed an inverse relationship between inflation and unemployment in the UK from 1861 to 1957. It then provides details on the contents of the Phillips Curve, including demand-pull and cost-push inflation. Finally, it explains the short-run and long-run Phillips Curves, noting that in the short-run there is a trade-off between inflation and unemployment, but in the long-run the natural unemployment rate is unchanged by inflation.
Inflation types and causes
Creeping inflation refers to a very low rise in prices like that of a snail or creeper. Moderate inflation occurs when prices rise moderately, while runway or galloping inflation describes rapidly rising prices at double or triple digit rates. The main theories of inflation are the quantity theory, demand pull theory, and cost push theory. The quantity theory states that too much money in the economy leads to inflation. Demand pull inflation occurs when aggregate demand increases more than supply, and cost push inflation happens when production costs rise, automatically increasing prices. Both monetary and fiscal measures can be used to reduce inflation.
Cause of inflation
The document discusses inflation, its definition as a general increase in price levels over time, and its causes. It identifies three main types of inflation: demand-pull inflation from increases in spending, cost-push inflation from drops in supply, and built-in inflation from past price and wage increases creating a spiral. The document was written by Ajeet Kumar Pandey in the batch SB2 on 08/01/2011 for an assignment on inflation and its causes.
Philip's Curve
The Phillips curve describes an inverse relationship between unemployment and inflation, such that lower unemployment is associated with higher inflation. While observed to be stable in the short-run, it does not hold in the long-run. The document discusses the origins of the Phillips curve from William Phillips' 1958 paper and subsequent modifications by economists like Friedman and Phelps who argued it does not reflect long-run economic realities. It also examines shifts to the Phillips curve from supply shocks and how the relationship between unemployment and inflation is now understood with incorporation of inflation expectations.
Chapter 7 - inflation ,unemployment and underemployment for BBA
This document defines various types of inflation including low inflation, galloping inflation, and hyperinflation. It also discusses different measures used to calculate inflation rates such as the Consumer Price Index (CPI) and Wholesale Price Index (WPI). Finally, it outlines several causes of inflation including demand-pull factors related to increases in the money supply according to the Quantity Theory of Money, and cost-push factors like increases in wages or costs of raw materials.
inflation
Inflation is defined as a general rise in prices for goods and services over time which results in a loss of purchasing power of a currency. Central banks aim to keep inflation within a target range to maintain economic stability. There are different types of inflation such as hyperinflation, which is a rapid rise in prices over 50% per month, and stagflation, which is stagnant economic growth combined with price inflation. Inflation can be caused by demand-pull factors like an increase in the money supply shifting aggregate demand curves out, or cost-push factors like increases in production costs shifting aggregate supply curves in. Effects of inflation include a redistribution of income and wealth between debtors and creditors, and losses for bond
Philips curve by nino bazhunaishvili
The document discusses the Phillips curve, which was developed by economist William Phillips and represents the inverse relationship between unemployment and inflation. It notes that Phillips found a consistent relationship in UK data from 1861-1957 where unemployment was high, wage growth was slow, and when unemployment was low, wages rose rapidly. The summary explains that the Phillips curve shows the tradeoff between inflation and unemployment, and how shifts in expected inflation or the natural unemployment rate cause the curve to shift positions.
Module 34 inflation and umemployment the phillips curve
The document discusses the Phillips curve, which shows the relationship between unemployment and inflation. It describes how Alban Phillips first observed an inverse relationship between wage growth and unemployment rates in Britain. Many economists then concluded there is a negative short-run relationship between unemployment and inflation rates, known as the short-run Phillips curve. However, changes in expected inflation rates can shift this curve. In the long run, policies aimed at reducing unemployment below the natural rate of unemployment lead to accelerating inflation.
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This document discusses inflation, including its types, causes, measurement, and remedies. It defines inflation as a sustained increase in prices over time that reduces a currency's value. The three main types are demand-pull, cost-push, and hyperinflation. Causes include population growth, political instability, wages increases, and money supply expansion outpacing economic growth. Inflation is measured using the Consumer Price Index. Remedies include monetary and fiscal policies, increasing output, population control, and simplifying consumption.
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The document discusses the Phillips curve and the relationship between inflation and unemployment. It describes the short-run Phillips curve as downward sloping, showing that higher inflation is linked to lower unemployment. The long-run Phillips curve is vertical at the natural rate of unemployment, so inflation changes do not affect unemployment. The document also examines how interest rates are determined based on real rates, expected inflation, and risk differences between countries. Higher inflation is associated with higher nominal interest rates.
Meeting 5 - Phillips curve 2 (Macroeconomics)
The document discusses the Phillips curve and inflation. It describes how the Phillips curve can shift due to changes in expected inflation, the natural rate of unemployment, and supply shocks. It also examines how inflation expectations, whether static, adaptive, or rational, affect the position and movement of the Phillips curve. The role of expectations in inflation is key. Finally, it outlines some costs of reducing inflation, like menu costs and shoe leather costs, as well as the costs of high and hyperinflation cases like Zimbabwe.
NAIRU
This document discusses Phillip's curve and the natural rate of unemployment. It notes that in the short run, there is an inverse relationship between unemployment and inflation depicted by Phillip's curve. However, in the long run Phillip's curve becomes vertical as inflation increases due to rising expectations. The natural rate of unemployment (NAIRU) is the rate below which inflation rises, as workers demand higher wages. The document argues the NAIRU theory suggests governments should not try to lower unemployment through demand policies, as that would only cause inflation. However, the NAIRU concept is criticized for lacking empirical evidence and for being against Keynesian demand management.
Inflation & unemployment
The document discusses the relationship between inflation and unemployment as depicted by the Phillips curve. It explains that demand-pull inflation is caused by increases in aggregate demand, while cost-push inflation stems from increases in costs of production. The Phillips curve shows an inverse relationship between inflation and unemployment in the short run, but this relationship breaks down in the long run as inflation expectations rise. The natural rate of unemployment is the rate at which inflation remains stable in the long run.
Meeting 4 - Phillips curve (Macroeconomics)
The document discusses the Phillips curve relationship between inflation and unemployment. It explains that the Phillips curve shows an inverse relationship between these two factors in the short run, but that attempts to lower unemployment in the long run will ultimately just lead to higher inflation. The natural rate of unemployment (NAIRU) is the level at which inflation is stable. While policies can temporarily exploit the short-run tradeoff, it will eventually shift the short-run Phillips curve to a higher inflation level. The document also discusses supply-side policies that may have reduced inflation pressures at low unemployment levels in recent decades.
Module33 typesofinflation,disinflation,anddeflation
The document discusses various concepts related to inflation including: the classical model of money and prices which states that increases in the money supply lead to equal percentage increases in prices; how governments can raise revenue through printing money which leads to inflation and imposes an "inflation tax"; and how hyperinflation can occur in a self-reinforcing cycle if a government prints too much money. It also covers moderate inflation, disinflation, the output gap, and the relationship between output and unemployment.
Philips curve
The Philip curve shows an inverse relationship between the rate of unemployment and the rate of change in money wages in the short run. Friedman argued that in the long run, there is no tradeoff between inflation and unemployment - the Philip curve becomes vertical at the natural rate of unemployment, which is the rate where expected and actual inflation are equal. Temporary reductions in unemployment below the natural rate are only possible if inflation rises above expectations, but eventually expectations will adjust and unemployment will return to the natural rate, even as inflation accelerates.
Stagflation
This document defines and explains the concept of stagflation. Stagflation occurs when inflation rises alongside a stagnant economy, with both prices and unemployment increasing. The Reserve Bank of India must balance fighting inflation through interest rate hikes with avoiding damaging economic growth and causing stagflation. For India's robust economy, this balancing act is less risky than for slower-growing countries. Removing structural obstacles and reforms can help unlock growth and steer an economy out of stagflation.
Presentation1 (2)
This document discusses the differences between microeconomics and macroeconomics. Microeconomics examines specific markets and how individual supply and demand affects prices. Macroeconomics looks at overall economic trends and how monetary policy impacts the whole economy. The document then provides details on inflation, including causes like demand-pull and cost-push inflation. Effects of inflation include reduced purchasing power and discouragement of savings. Ways to combat inflation include fiscal and monetary policies at the national level and conservative spending at the individual level. The document also briefly discusses deflation.
Stagflation
This document defines and explains the concept of stagflation. Stagflation occurs when inflation rises but the economy experiences stagnant or limited growth. During stagflation, prices rise while employment, consumption, and overall economic growth decline. The role of central banks like the RBI is crucial, as they must raise interest rates to curb inflation without slowing growth to the point of causing stagflation. While inflation poses problems, stagflation is considered worse due to its combination of high inflation and economic stagnation. The remedies for stagflation include structural reforms to unlock growth and tight monetary policy by central banks.
Phillips curve hypothesis
The Phillips curve hypothesis suggests there is an inverse relationship between unemployment and inflation, where lower unemployment leads to higher inflation. This relationship was observed in UK data from 1861-1957. The Keynesian explanation is that as aggregate demand increases, output and employment rise along the aggregate supply curve, leading to higher prices and wages. On a graph with inflation on the y-axis and unemployment on the x-axis, this shows as a negatively sloped Phillips curve. The government faces a dilemma of balancing unemployment and inflation levels.
Inflation and phillips curve
- The short-run Phillips curve shows an inverse relationship between unemployment and inflation in the short term, but this disappears in the long run.
- Milton Friedman argued that in the long run, inflation is dependent on expected inflation rather than actual unemployment. The long-run Phillips curve is vertical at the natural rate of unemployment.
- Differences between expected and actual inflation can cause temporary deviations from the natural rate of unemployment in the short run, but inflation expectations eventually adjust, and unemployment returns to the natural rate in the long run.
Inflation and the Phillips Curve
The document summarizes research from the Congressional Budget Office on inflation and the Phillips curve. It finds that while the aggregate Phillips curve is quite flat, estimating the relationship at the component level reveals differences between goods and services inflation. Services inflation remains procyclical, driven by domestic factors, while goods inflation has become less procyclical in recent decades due to globalization and other structural forces. The document also examines how measures of inflation expectations have evolved from being backward-looking to becoming more anchored, though consumers' expectations remain more responsive to shocks than professionals' forecasts.
Chapter 16 Phillips Curve
The document discusses different economic theories related to taxation and government policies, including supply-side economics, the Laffer curve, and Reaganomics. It provides context on theories of the relationship between taxation rates and government revenue, and debates around using tax policy to influence economic growth. Historical examples from the Nixon and Reagan administrations regarding wage and price controls and tax cuts are analyzed in light of these economic concepts.
Stagflation
The document discusses stagflation that occurred in the late 1970s to early 1980s. Stagflation is defined as high inflation combined with high unemployment and economic recession. It was caused by external shocks like increased oil prices which raised production costs. Central banks faced a policy dilemma of whether to prioritize fighting inflation or recession. The Bank of Canada chose to target inflation, gradually reducing money supply growth and accepting short-term higher unemployment. This slowed inflation over time, though it caused economic turmoil initially. The Bank of Canada now uses an inflation target of 2% to guide monetary policy decisions.
Chapter 19 Classical vs. Keynesian
The document discusses different macroeconomic theories including:
- Classical economists believed in full employment and laissez-faire markets.
- Keynesians believe active government policy is needed to stabilize the economy due to unstable aggregate demand and downwardly inflexible prices and wages.
- Monetarists like Milton Friedman advocated for a monetary rule where the money supply increases 3-5% annually. They believe velocity is stable.
- New Keynesians see the economy as potentially unstable due to changes in investment and supply shocks. They support monetary policy targeting interest rates in the short-run and money supply in the long-run.
Phillips curve unemployment-inflation
The document discusses the Phillips Curve and the relationship between inflation and unemployment. It notes that in the short-run, there is an inverse relationship where lower unemployment is associated with higher inflation and vice versa. However, in the long-run there is no consistent tradeoff because aggregate supply shocks can cause both inflation and unemployment to rise simultaneously. While adverse shocks can shift the Phillips Curve outward in the short-run, in the long-run the curve will always be vertical as the economy adjusts through factors like declining wages and input prices.
Stagflation
While inflation refers to rising prices in a growing economy, stagflation takes place when price rises are accompanied by a stagnant economy.
Inflation
The document discusses various topics related to inflation including:
1. Inflation is defined as a rise in general price levels reported as a rate of change which reduces the purchasing power of money.
2. Inflation can be caused by increases in the money supply, reductions in goods available, decreases in demand for money, and increases in demand for goods.
3. Effects of inflation include a reduction in purchasing power of currency, changes to spending habits, speculation, and impacts to income distribution between lenders and borrowers.
Presentation Inflation
Inflation is defined as a sustained increase in the general price level of goods and services in an economy over time, meaning it takes more money to buy the same items. It can be caused by demand-pull inflation, when strong demand pushes prices up as capacity is reached, or cost-push inflation, where increased costs of production like wages or materials are passed to consumers. Printing more money can also cause inflation by increasing the money supply chasing the same amount of goods. While some groups like businesses and debtors benefit from inflation, others such as wage-earners and pensioners are hurt by the loss of purchasing power. In conclusion, inflation is a sign of economic growth but can become problematic if prices rise too sharply.
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Inflation and Deflation key information for ECON4 - Building on the knowledge you should have from ECON2
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This document discusses inflation, including its types, causes, measurement, and remedies. It defines inflation as a sustained increase in prices over time that reduces a currency's value. The three main types are demand-pull, cost-push, and hyperinflation. Causes include population growth, political instability, wages increases, and money supply expansion outpacing economic growth. Inflation is measured using the Consumer Price Index. Remedies include monetary and fiscal policies, increasing output, population control, and simplifying consumption.
Phillips Curve, Inflation & Interest Rate
The document discusses the Phillips curve and the relationship between inflation and unemployment. It describes the short-run Phillips curve as downward sloping, showing that higher inflation is linked to lower unemployment. The long-run Phillips curve is vertical at the natural rate of unemployment, so inflation changes do not affect unemployment. The document also examines how interest rates are determined based on real rates, expected inflation, and risk differences between countries. Higher inflation is associated with higher nominal interest rates.
Meeting 5 - Phillips curve 2 (Macroeconomics)
The document discusses the Phillips curve and inflation. It describes how the Phillips curve can shift due to changes in expected inflation, the natural rate of unemployment, and supply shocks. It also examines how inflation expectations, whether static, adaptive, or rational, affect the position and movement of the Phillips curve. The role of expectations in inflation is key. Finally, it outlines some costs of reducing inflation, like menu costs and shoe leather costs, as well as the costs of high and hyperinflation cases like Zimbabwe.
NAIRU
This document discusses Phillip's curve and the natural rate of unemployment. It notes that in the short run, there is an inverse relationship between unemployment and inflation depicted by Phillip's curve. However, in the long run Phillip's curve becomes vertical as inflation increases due to rising expectations. The natural rate of unemployment (NAIRU) is the rate below which inflation rises, as workers demand higher wages. The document argues the NAIRU theory suggests governments should not try to lower unemployment through demand policies, as that would only cause inflation. However, the NAIRU concept is criticized for lacking empirical evidence and for being against Keynesian demand management.
Inflation & unemployment
The document discusses the relationship between inflation and unemployment as depicted by the Phillips curve. It explains that demand-pull inflation is caused by increases in aggregate demand, while cost-push inflation stems from increases in costs of production. The Phillips curve shows an inverse relationship between inflation and unemployment in the short run, but this relationship breaks down in the long run as inflation expectations rise. The natural rate of unemployment is the rate at which inflation remains stable in the long run.
Meeting 4 - Phillips curve (Macroeconomics)
The document discusses the Phillips curve relationship between inflation and unemployment. It explains that the Phillips curve shows an inverse relationship between these two factors in the short run, but that attempts to lower unemployment in the long run will ultimately just lead to higher inflation. The natural rate of unemployment (NAIRU) is the level at which inflation is stable. While policies can temporarily exploit the short-run tradeoff, it will eventually shift the short-run Phillips curve to a higher inflation level. The document also discusses supply-side policies that may have reduced inflation pressures at low unemployment levels in recent decades.
Module33 typesofinflation,disinflation,anddeflation
The document discusses various concepts related to inflation including: the classical model of money and prices which states that increases in the money supply lead to equal percentage increases in prices; how governments can raise revenue through printing money which leads to inflation and imposes an "inflation tax"; and how hyperinflation can occur in a self-reinforcing cycle if a government prints too much money. It also covers moderate inflation, disinflation, the output gap, and the relationship between output and unemployment.
Philips curve
The Philip curve shows an inverse relationship between the rate of unemployment and the rate of change in money wages in the short run. Friedman argued that in the long run, there is no tradeoff between inflation and unemployment - the Philip curve becomes vertical at the natural rate of unemployment, which is the rate where expected and actual inflation are equal. Temporary reductions in unemployment below the natural rate are only possible if inflation rises above expectations, but eventually expectations will adjust and unemployment will return to the natural rate, even as inflation accelerates.
Stagflation
This document defines and explains the concept of stagflation. Stagflation occurs when inflation rises alongside a stagnant economy, with both prices and unemployment increasing. The Reserve Bank of India must balance fighting inflation through interest rate hikes with avoiding damaging economic growth and causing stagflation. For India's robust economy, this balancing act is less risky than for slower-growing countries. Removing structural obstacles and reforms can help unlock growth and steer an economy out of stagflation.
Presentation1 (2)
This document discusses the differences between microeconomics and macroeconomics. Microeconomics examines specific markets and how individual supply and demand affects prices. Macroeconomics looks at overall economic trends and how monetary policy impacts the whole economy. The document then provides details on inflation, including causes like demand-pull and cost-push inflation. Effects of inflation include reduced purchasing power and discouragement of savings. Ways to combat inflation include fiscal and monetary policies at the national level and conservative spending at the individual level. The document also briefly discusses deflation.
Stagflation
This document defines and explains the concept of stagflation. Stagflation occurs when inflation rises but the economy experiences stagnant or limited growth. During stagflation, prices rise while employment, consumption, and overall economic growth decline. The role of central banks like the RBI is crucial, as they must raise interest rates to curb inflation without slowing growth to the point of causing stagflation. While inflation poses problems, stagflation is considered worse due to its combination of high inflation and economic stagnation. The remedies for stagflation include structural reforms to unlock growth and tight monetary policy by central banks.
Phillips curve hypothesis
The Phillips curve hypothesis suggests there is an inverse relationship between unemployment and inflation, where lower unemployment leads to higher inflation. This relationship was observed in UK data from 1861-1957. The Keynesian explanation is that as aggregate demand increases, output and employment rise along the aggregate supply curve, leading to higher prices and wages. On a graph with inflation on the y-axis and unemployment on the x-axis, this shows as a negatively sloped Phillips curve. The government faces a dilemma of balancing unemployment and inflation levels.
Inflation and phillips curve
- The short-run Phillips curve shows an inverse relationship between unemployment and inflation in the short term, but this disappears in the long run.
- Milton Friedman argued that in the long run, inflation is dependent on expected inflation rather than actual unemployment. The long-run Phillips curve is vertical at the natural rate of unemployment.
- Differences between expected and actual inflation can cause temporary deviations from the natural rate of unemployment in the short run, but inflation expectations eventually adjust, and unemployment returns to the natural rate in the long run.
Inflation and the Phillips Curve
The document summarizes research from the Congressional Budget Office on inflation and the Phillips curve. It finds that while the aggregate Phillips curve is quite flat, estimating the relationship at the component level reveals differences between goods and services inflation. Services inflation remains procyclical, driven by domestic factors, while goods inflation has become less procyclical in recent decades due to globalization and other structural forces. The document also examines how measures of inflation expectations have evolved from being backward-looking to becoming more anchored, though consumers' expectations remain more responsive to shocks than professionals' forecasts.
Chapter 16 Phillips Curve
The document discusses different economic theories related to taxation and government policies, including supply-side economics, the Laffer curve, and Reaganomics. It provides context on theories of the relationship between taxation rates and government revenue, and debates around using tax policy to influence economic growth. Historical examples from the Nixon and Reagan administrations regarding wage and price controls and tax cuts are analyzed in light of these economic concepts.
Stagflation
The document discusses stagflation that occurred in the late 1970s to early 1980s. Stagflation is defined as high inflation combined with high unemployment and economic recession. It was caused by external shocks like increased oil prices which raised production costs. Central banks faced a policy dilemma of whether to prioritize fighting inflation or recession. The Bank of Canada chose to target inflation, gradually reducing money supply growth and accepting short-term higher unemployment. This slowed inflation over time, though it caused economic turmoil initially. The Bank of Canada now uses an inflation target of 2% to guide monetary policy decisions.
Chapter 19 Classical vs. Keynesian
The document discusses different macroeconomic theories including:
- Classical economists believed in full employment and laissez-faire markets.
- Keynesians believe active government policy is needed to stabilize the economy due to unstable aggregate demand and downwardly inflexible prices and wages.
- Monetarists like Milton Friedman advocated for a monetary rule where the money supply increases 3-5% annually. They believe velocity is stable.
- New Keynesians see the economy as potentially unstable due to changes in investment and supply shocks. They support monetary policy targeting interest rates in the short-run and money supply in the long-run.
Phillips curve unemployment-inflation
The document discusses the Phillips Curve and the relationship between inflation and unemployment. It notes that in the short-run, there is an inverse relationship where lower unemployment is associated with higher inflation and vice versa. However, in the long-run there is no consistent tradeoff because aggregate supply shocks can cause both inflation and unemployment to rise simultaneously. While adverse shocks can shift the Phillips Curve outward in the short-run, in the long-run the curve will always be vertical as the economy adjusts through factors like declining wages and input prices.
Stagflation
While inflation refers to rising prices in a growing economy, stagflation takes place when price rises are accompanied by a stagnant economy.
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Module33 typesofinflation,disinflation,anddeflation
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The document discusses various topics related to inflation including:
1. Inflation is defined as a rise in general price levels reported as a rate of change which reduces the purchasing power of money.
2. Inflation can be caused by increases in the money supply, reductions in goods available, decreases in demand for money, and increases in demand for goods.
3. Effects of inflation include a reduction in purchasing power of currency, changes to spending habits, speculation, and impacts to income distribution between lenders and borrowers.
Presentation Inflation
Inflation is defined as a sustained increase in the general price level of goods and services in an economy over time, meaning it takes more money to buy the same items. It can be caused by demand-pull inflation, when strong demand pushes prices up as capacity is reached, or cost-push inflation, where increased costs of production like wages or materials are passed to consumers. Printing more money can also cause inflation by increasing the money supply chasing the same amount of goods. While some groups like businesses and debtors benefit from inflation, others such as wage-earners and pensioners are hurt by the loss of purchasing power. In conclusion, inflation is a sign of economic growth but can become problematic if prices rise too sharply.
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This document was made as an assignment for the course of Economics.
This document was made by the help of several books and online portals. Thanks to the author of that resources.
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This document defines different types of inflation and provides examples of each. It discusses creeping, walking, and galloping inflation, defined by annual price increases of less than 3%, 3-10%, and over 10% respectively. Hyperinflation occurs when prices rise over 50% per month. Stagflation is when economic growth stagnates while prices still inflate. Core inflation excludes food and energy prices. Wage inflation is when pay rises faster than cost of living. Demand pull inflation results from demand increasing faster than supply, while cost push inflation stems from higher production costs.
Inflation lesson 9
The document discusses inflation, including its definition, causes, and effects. Inflation is defined as a rise in general price levels reported as a percentage change from a base year. Common causes of inflation include demand-pull factors like shortages, cost-push factors like increases in wages, and excessive monetary growth outpacing economic growth. Effects of inflation include a decreased purchasing power of currency, changes in consumer and investor spending habits, speculation on high-risk investments, and changes to the distribution of income between lenders and borrowers.
Inflation lesson 9
The document discusses inflation, including its definition, causes, and effects. Inflation is defined as a rise in the general price level over time. It is measured as an annual percentage increase by comparing the consumer price index from one year to the previous year. Common causes of inflation include demand-pull factors, government deficits, cost-push pressures like increased wages, and excessive monetary growth. Effects of inflation are a decreased purchasing power of currency, economic instability as spending habits change, speculation, and shifts in the distribution of income between borrowers and lenders.
Inflation lesson 9
The document discusses inflation, including its definition, causes, and effects. Inflation is defined as a rise in general price levels reported as a percentage change from a base year. Common causes of inflation include demand-pull factors like shortages, cost-push factors like increases in wages, and excessive monetary growth outpacing economic growth. Effects of inflation include a decreased purchasing power of currency, changes in consumer and investor spending habits, speculation on high-risk investments, and changes to the distribution of income between lenders and borrowers.
What are the Different Types of Inflation?
Inflation is the rise in the prices of goods and services with time. Inflation is of various types and is determined based on different parameters. It is important to have some level of inflation in an economy as deflation can have a negative effect. Visit https://indianmoney.com/articles/different-types-of-inflation to know more.
Inflation
This document defines several key terms related to inflation, including:
- Inflation is a general rise in price levels over time which reduces purchasing power.
- Types of inflation include demand-pull, cost-push, open vs suppressed.
- Low, steady inflation is generally preferred to mitigate recessions and encourage investment.
- Central banks aim to keep inflation low and stable through interest rates and money supply.
Inflation
Inflation refers to a sustained increase in the general price level of goods and services over time. A temporary or limited price increase in a specific industry does not constitute inflation. Inflation is undesirable as it causes price instability and affects consumer purchasing decisions. While some price increases are inevitable, the government's goal is to keep the rate of inflation as low as possible to promote price stability. Inflation is measured using price indexes like the consumer price index. There are two main types of inflation - demand-pull inflation, which occurs when demand outpaces supply, and cost-push inflation, which results from increased production costs that get passed onto consumers in the form of higher prices. The ultimate effects of inflation are a decrease in purchasing
Inflation and business cycle
Inflation in early 20th century Germany caused prices to rise so rapidly that savings were quickly erased. Inflation is generally defined as a sustained rise in the general price level caused by an increase in the money supply. It can have varying effects on different groups in society such as harming fixed-income earners but potentially benefiting debtors. Countries use monetary, fiscal and other measures to control inflation and stabilize prices.
inflation.ppt.pptx
This document defines inflation and discusses how to measure it using price indexes like the Consumer Price Index. It describes types of inflation such as creeping, galloping, and hyperinflation. Causes of inflation include demand-pull factors like excessive spending, cost-push factors like rising input costs, and built-in inflation from price/wage spirals. Effects are the redistribution of wealth from savers to borrowers, social impacts, and economic inefficiencies from distorted prices. Methods to stop inflation involve controlling wages and prices, stimulating competition, and monetary/fiscal policy measures.
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inflation
- 2. Introduction Inflation is defined as a sustained increase in the price level or a fall in the value of money. When the level of currency of a country exceeds the level of production , inflation occurs . Value of money depreciates with the occurrence of inflation. According to c. crowther ‘ inflation is state in which the value of money is falling and the prices are rising’ .
- 3. Causes of inflation 1. Demand pull inflation - If the economy is at or close to full employment then an increase in AD leads to an increase in the price level. As firms reach full capacity, they respond by putting up prices, leading to inflation. Also, near full employment, workers can get higher wages which increases their spending power.
- 4. AD can increase due to an increase in any of its components C+I+G+X-M We tend to get demand pull inflation, if economic growth is above the long run trend rate of growth . The long run trend rate of economic growth is the average sustainable rate of growth and is determined by the growth in productivity.
- 5. 2. Cost push inflation If there is an increase in the costs of firms, then firms will pass this on to consumers. There will be a shift to the left in the AS.
- 6. 3. Rising house prices Rising house prices do not directly cause inflation, but they can cause a positive wealth effect and encourage consumer led economic growth. This can indirectly cause demand pull inflation.
- 7. 4. Printing more money If the Central Bank prints more money, you would expect to see a rise in inflation. This is because the money supply plays an important role in determining prices. If there is more money chasing the same amount of goods, then prices will rise. Hyperinflation is usually caused by an extreme increase in the money supply However, in exceptional circumstances – such as liquidity trap / recession, it is possible to increase the money supply without causing inflation. This is because in recession, an increase in the money supply may just be saved, e.g. banks don’t increase lending but just keep more bank reserves.
- 9. Market- power theory of inflation In an economy, when a single or a group of sellers together decide a new price that is different from the competitive price, then the price is termed as market-power price. Such groups keep prices at the level at which they can earn maximum profit without any concern for the purchasing power of consumers. For example, in the past few years, the prices of onion were very- high in India. The soaring price of onions was the result of the group action of onion producers. In such a situation, people in middle and low income groups reduced the consumption of onions. However, onion producers earned high profits from higher income group.
- 10. Conventional demand pull inflation The market power theory of inflation represents one extreme end of inflation. According to this theory inflation exists even when there is no excess in demand. On the other end, the conventional demand-pull theorists believed that the only cause of inflation is the excess of aggregate demand over aggregate supply. In full employment equilibrium condition, when demand increases, inflation becomes unavoidable. In addition in full employment condition, the economy reaches to its maximum production capacity. At this point, the supply of goods and services cannot be increased further while the demand of products and services increases rapidly. Due to this imbalance between demand and supply, inflation takes place in the economy.
- 11. Structural theories of inflation there is a middle group of economists called structural economists. According to structural theory of inflation, market power is one of the factors that cause inflation, but it is not the only factor. The supporters of structural theories believed that the inflation arises due to structural maladjustments in the county or some of the institutional features of business environment.