The Phillips Curve and US Monetary Policy
... analysis of the importance of this framework for monetary policy, and we do this by extensive reading and analysis of the verbatim transcripts of meetings of the Federal Open Market Committee (FOMC). Our document analysis is supplemented by an analysis of forecasts of inflation, unemployment, and th ...
... analysis of the importance of this framework for monetary policy, and we do this by extensive reading and analysis of the verbatim transcripts of meetings of the Federal Open Market Committee (FOMC). Our document analysis is supplemented by an analysis of forecasts of inflation, unemployment, and th ...
The Economics of the Government Budget
... misleading,for there are lags in the process of adaptationof money demand to inflation. In the very short run of a few days or weeks, the government can almost always increase its revenue by printingmoney more rapidly. But the longer a process of high inflationcontinues,the more the demand for real ...
... misleading,for there are lags in the process of adaptationof money demand to inflation. In the very short run of a few days or weeks, the government can almost always increase its revenue by printingmoney more rapidly. But the longer a process of high inflationcontinues,the more the demand for real ...
What Explains Inflation in China?
... Based on empirical trends of inflation and explanatory factors (discussed substantially in chapter 3), the hypothesis of this research paper is that inflation in China is largely driven by excess money supply, and is correlated with changes in food price level. Specifically, from demand pull perspec ...
... Based on empirical trends of inflation and explanatory factors (discussed substantially in chapter 3), the hypothesis of this research paper is that inflation in China is largely driven by excess money supply, and is correlated with changes in food price level. Specifically, from demand pull perspec ...
Wage Rigidity in the Great Depression June, 2012 Christopher Hanes Department of Economics
... nominal wage rigidity, a special constraint against nominal wage cuts, interacting with another social norm linking wages to employers' profits.) The National Recovery Administration (NRA), established in 1933, not only promoted product-market cartels: it also fixed minimum wages by industry, banne ...
... nominal wage rigidity, a special constraint against nominal wage cuts, interacting with another social norm linking wages to employers' profits.) The National Recovery Administration (NRA), established in 1933, not only promoted product-market cartels: it also fixed minimum wages by industry, banne ...
AP Macroeconomics Chapter One p. 3-10
... • Economists use the circular flow diagram to show the high degree of economic interdependence in our economy. Money flows in one direction while goods, services, and the factors of production flow in the opposite direction. • This simple circular flow model shows two groups of decisionmakers—househ ...
... • Economists use the circular flow diagram to show the high degree of economic interdependence in our economy. Money flows in one direction while goods, services, and the factors of production flow in the opposite direction. • This simple circular flow model shows two groups of decisionmakers—househ ...
Aggregate Demand/Aggregate Supply
... macroeconomic model and activist policy prescriptions. These alternative schools of thought use models that differ significantly from the standard aggregate demand and aggregate supply model. We can briefly consider each of the three major alternative models: 1 The monetarist model ...
... macroeconomic model and activist policy prescriptions. These alternative schools of thought use models that differ significantly from the standard aggregate demand and aggregate supply model. We can briefly consider each of the three major alternative models: 1 The monetarist model ...
Solutions to Problems
... 7a. An increase in government expenditures and a decrease in taxes are expansionary fiscal policies. Aggregate demand increases in the first round. Real GDP and the price level begin to increase. In the second round, the increasing real GDP increases the demand for money and the interest rate rises. ...
... 7a. An increase in government expenditures and a decrease in taxes are expansionary fiscal policies. Aggregate demand increases in the first round. Real GDP and the price level begin to increase. In the second round, the increasing real GDP increases the demand for money and the interest rate rises. ...
Answers to Text Questions and Problems in
... Stagflation is the combination of a recessionary gap and a rising price level. This situation is hard to depict on a Keynesian cross diagram, because the basic Keynesian model assumes that prices are constant. 2. This is the fallacy of composition. If the long-run aggregate supply curve is vertical, ...
... Stagflation is the combination of a recessionary gap and a rising price level. This situation is hard to depict on a Keynesian cross diagram, because the basic Keynesian model assumes that prices are constant. 2. This is the fallacy of composition. If the long-run aggregate supply curve is vertical, ...
Economics: Explore and Apply 1/e by Ayers and Collinge Chapter 9
... Likewise if the expected price level decreases , short-run supply shifts downward. ©2004 Prentice Hall Publishing ...
... Likewise if the expected price level decreases , short-run supply shifts downward. ©2004 Prentice Hall Publishing ...
SRAS
... effects but accounts of much of the short-run variation in real GDP and the price level—implications of Keynesian theory in the short run. • Over a long-run horizon, an aggregate demand shock as a consequence of changes in the quantity of money in circulation, affects changes in the price level, whi ...
... effects but accounts of much of the short-run variation in real GDP and the price level—implications of Keynesian theory in the short run. • Over a long-run horizon, an aggregate demand shock as a consequence of changes in the quantity of money in circulation, affects changes in the price level, whi ...
Anna Jacobson Schwartz: In Memoriam George S. Tavlas
... policy centered on the use of fiscal measures aimed at attaining both full employment and price-level stability. In some ways, the two scholars were very different. Milton felt at home whether in a classroom, a professional conference, or the public spotlight, giving testimony before a congressional ...
... policy centered on the use of fiscal measures aimed at attaining both full employment and price-level stability. In some ways, the two scholars were very different. Milton felt at home whether in a classroom, a professional conference, or the public spotlight, giving testimony before a congressional ...
Public Policy Brief 71 - Levy Economics Institute of Bard College
... portfolios decline in value. This reduction in net wealth has an impact on people’s purchases of consumer goods. The interest rate channel and the monetarist channel can be taken together. The interest rate channel works because consumers and business people are likely to make more purchases when th ...
... portfolios decline in value. This reduction in net wealth has an impact on people’s purchases of consumer goods. The interest rate channel and the monetarist channel can be taken together. The interest rate channel works because consumers and business people are likely to make more purchases when th ...
Long Run Aggregate Supply
... 2. Determine whether curve shifts left or right. 3. Use AD-AS diagram to see how the shift changes Y and P in the short run. ...
... 2. Determine whether curve shifts left or right. 3. Use AD-AS diagram to see how the shift changes Y and P in the short run. ...
Chapter 1: Introduction
... Okun's law, that means that the output gap—real GDP relative to potential output—falls by some five percent. Five percent is about four years worth of growth in output per worker. Moreover, recessions are not permanent; with rare exceptions, they are over in a year or two and are followed by periods ...
... Okun's law, that means that the output gap—real GDP relative to potential output—falls by some five percent. Five percent is about four years worth of growth in output per worker. Moreover, recessions are not permanent; with rare exceptions, they are over in a year or two and are followed by periods ...
Macroeconomic Implication of Currency Management in Nigeria
... It has been indicated in the literature that one of the reasons adduced for currency restructuring is the need to fight inflation. The literature, has however established that, the fundamentals of the economy which determine sustainable economic growth are prudent fiscal and monetary policies. In ef ...
... It has been indicated in the literature that one of the reasons adduced for currency restructuring is the need to fight inflation. The literature, has however established that, the fundamentals of the economy which determine sustainable economic growth are prudent fiscal and monetary policies. In ef ...
Chapter 21 : What Macroeconomics Is All About?
... the preceding 13 years, an average annual rate of increase of 3.82 percent. The CPI is not a perfect measure of the cost of living because it does not account for quality improvements or for the tendency of consumers to purchase more of things whose prices fall, (and less of things whose prices rise ...
... the preceding 13 years, an average annual rate of increase of 3.82 percent. The CPI is not a perfect measure of the cost of living because it does not account for quality improvements or for the tendency of consumers to purchase more of things whose prices fall, (and less of things whose prices rise ...
Advanced Placement Macroeconomics Study Notes 17th edition of
... manufacturing supplies (as opposed to a negative shock to supplies) and, therefore, tend to lead the business cycle. 9. Money supply: In inflation-adjusted dollars, this is the M2 version of the money supply. When the money supply does not keep pace with inflation, bank lending may fall in real term ...
... manufacturing supplies (as opposed to a negative shock to supplies) and, therefore, tend to lead the business cycle. 9. Money supply: In inflation-adjusted dollars, this is the M2 version of the money supply. When the money supply does not keep pace with inflation, bank lending may fall in real term ...
The Effect of Deflation or High Inflation on the Insurance Industry
... if inflation targeting is among its top objectives (see Levin, Natalucci, and Piger (2004)). Monetary economists (such as Nobel Laureate Milton Friedman) argue that it is the supply of money that leads to inflation. Given the breakdown of the gold standard, money supply is no longer fixed in supply. ...
... if inflation targeting is among its top objectives (see Levin, Natalucci, and Piger (2004)). Monetary economists (such as Nobel Laureate Milton Friedman) argue that it is the supply of money that leads to inflation. Given the breakdown of the gold standard, money supply is no longer fixed in supply. ...
Answers to Practice Questions 8
... By definition the aggregate demand curve represents a relationship between the (shortrun Keynesian aggregate model) equilibrium and the price level. The effect of the price level is traced through shifts in the money demand curve which determines the interest rate through the money market equilibriu ...
... By definition the aggregate demand curve represents a relationship between the (shortrun Keynesian aggregate model) equilibrium and the price level. The effect of the price level is traced through shifts in the money demand curve which determines the interest rate through the money market equilibriu ...
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.