THE EFFECT OF INTEREST RATE, INFLATION RATE, GDP, ON
... an increase in federal government debt equivalent to one percent of GDP, all else equal, would be expected to increase the long-term real rate of interest by about three basis points. Giovanni and Shambaugh (2007): This paper explored the connection between interest rates in major industrial countri ...
... an increase in federal government debt equivalent to one percent of GDP, all else equal, would be expected to increase the long-term real rate of interest by about three basis points. Giovanni and Shambaugh (2007): This paper explored the connection between interest rates in major industrial countri ...
The Study of Economics
... • Largely owing to changes in law-enforcement strategies, the number of American adults in jail or prison has risen from 503,586 in 1980 (0.5% of the labor force) to 2.3 million in 2007 (1.5% of the labor force). • The rise in the prison population might have lopped about 0.2 percentage points off t ...
... • Largely owing to changes in law-enforcement strategies, the number of American adults in jail or prison has risen from 503,586 in 1980 (0.5% of the labor force) to 2.3 million in 2007 (1.5% of the labor force). • The rise in the prison population might have lopped about 0.2 percentage points off t ...
Superneutrality of Money under Open Market Operations
... interest rates and hold lower real cash balances. As is usual in frictionless models, a more expansionary policy increases the nominal interest rate through the Fisher effect (or expected inflation effect). It should be emphasized that prices and interest rates increase in period t*, although the mo ...
... interest rates and hold lower real cash balances. As is usual in frictionless models, a more expansionary policy increases the nominal interest rate through the Fisher effect (or expected inflation effect). It should be emphasized that prices and interest rates increase in period t*, although the mo ...
Chapter 34
... The Theory of Liquidity Preference: Money Demand • Money demand is determined by three main factors. • interest rate↑⇒ money demand ↓ • People choose to hold money instead of other assets that offer higher rates of return because money can be used to buy goods and services. • The opportunity cost o ...
... The Theory of Liquidity Preference: Money Demand • Money demand is determined by three main factors. • interest rate↑⇒ money demand ↓ • People choose to hold money instead of other assets that offer higher rates of return because money can be used to buy goods and services. • The opportunity cost o ...
Research Department Working Paper No:05/07
... It is also known that the relation between the quantity of money and the nominal income is not the only alternative for the policy makers to control nominal income or its components, inflation and real output. As stated by Modigliani and Papademos (1990), if there exist any other relations between n ...
... It is also known that the relation between the quantity of money and the nominal income is not the only alternative for the policy makers to control nominal income or its components, inflation and real output. As stated by Modigliani and Papademos (1990), if there exist any other relations between n ...
CHAPTER 2 NATIONAL INCOME ACCOUNTING Chapter Outline
... with measuring inflation. A brief discussion of the usefulness and shortcomings of these different measures of inflation should point out why the price indexes do not always change at the same rate even though their rates of change over long time spans tend to be fairly similar. The PPI measures pri ...
... with measuring inflation. A brief discussion of the usefulness and shortcomings of these different measures of inflation should point out why the price indexes do not always change at the same rate even though their rates of change over long time spans tend to be fairly similar. The PPI measures pri ...
DUCTION The classical theory of the price level is sometimes
... also yield a benefit. To classicaltheorists, this benefit was the advantagethat comes from being more easily able to exchangecommoditieswith other householdsin the economy; in other words, money is a generally acceptablemedium of exchange. Considerthe processof exchangein a barter economy.Supposetha ...
... also yield a benefit. To classicaltheorists, this benefit was the advantagethat comes from being more easily able to exchangecommoditieswith other householdsin the economy; in other words, money is a generally acceptablemedium of exchange. Considerthe processof exchangein a barter economy.Supposetha ...
National Economic Collapse and Revival, The Case of Zimbabwe
... Inflation is the process were by a currency loses its value due to many factors that include for example; a increase in demand for products and extreme printing of money by central banks. (Andrew B. Abel, Inflation, 2008) It can also be described as a sustained increase in the general price levels i ...
... Inflation is the process were by a currency loses its value due to many factors that include for example; a increase in demand for products and extreme printing of money by central banks. (Andrew B. Abel, Inflation, 2008) It can also be described as a sustained increase in the general price levels i ...
Economics: Explore and Apply 1/e by Ayers and Collinge Chapter 8
... Real GDP ©2004 Prentice Hall Publishing ...
... Real GDP ©2004 Prentice Hall Publishing ...
Economics: Explore and Apply 1/e by Ayers and Collinge Chapter 8
... Real GDP ©2004 Prentice Hall Publishing ...
... Real GDP ©2004 Prentice Hall Publishing ...
Modern Macroeconomics and Monetary Policy
... • Assume the Fed expands the supply of money by buying bonds… which will increase bank reserves … pushing real interest rates down … which leads to increased investment and consumption … a depreciation of the dollar (leading to increased net exports) and … an increase in the general level of asset p ...
... • Assume the Fed expands the supply of money by buying bonds… which will increase bank reserves … pushing real interest rates down … which leads to increased investment and consumption … a depreciation of the dollar (leading to increased net exports) and … an increase in the general level of asset p ...
DETERMINANT AND IMPACTS OF DYNAMIC INFLATION IN
... the producers. GDP-Deflator: It is the ratio of nominal and real gross domestic product. The types of inflation measurement provide different outcomes with their respective purpose (Joshua K., 2010). However, this particular research thesis uses consumer price index as a ...
... the producers. GDP-Deflator: It is the ratio of nominal and real gross domestic product. The types of inflation measurement provide different outcomes with their respective purpose (Joshua K., 2010). However, this particular research thesis uses consumer price index as a ...
Revival of Aggregate Demand Policies – Introduction
... At this juncture it becomes important to explain what we mean by aggregate demand management. As far as monetary policy is concerned, many researchers assume that it is conducted by some rule, usually one in which the shortrun interest rate (the monetary authority’s instrument) is linked to inflatio ...
... At this juncture it becomes important to explain what we mean by aggregate demand management. As far as monetary policy is concerned, many researchers assume that it is conducted by some rule, usually one in which the shortrun interest rate (the monetary authority’s instrument) is linked to inflatio ...
NBER WORKING PAPER SERIES RECENT DEVELOPMENTS IN MACROECONOMICS Working Paper No. 2473
... lS—L.M model; Brunner and Meltzer's (1976) basic analytic model is not dissimilar to Tobin'; (1969) three asset model. Friedman's view of the macroeconomy as adjusting slowly and unpredictably to monetary policy is very far from the modern real business cycle view that monetary policy plays at most ...
... lS—L.M model; Brunner and Meltzer's (1976) basic analytic model is not dissimilar to Tobin'; (1969) three asset model. Friedman's view of the macroeconomy as adjusting slowly and unpredictably to monetary policy is very far from the modern real business cycle view that monetary policy plays at most ...
Aggregate Demand and Supply
... fluctuations around long-run trends. • These fluctuations are irregular and largely unpredictable. • When recessions occur, real GDP and other measures of income, spending, and production fall, and unemployment rises. ...
... fluctuations around long-run trends. • These fluctuations are irregular and largely unpredictable. • When recessions occur, real GDP and other measures of income, spending, and production fall, and unemployment rises. ...
Price Level
... fluctuations around long-run trends. • These fluctuations are irregular and largely unpredictable. • When recessions occur, real GDP and other measures of income, spending, and production fall, and unemployment rises. ...
... fluctuations around long-run trends. • These fluctuations are irregular and largely unpredictable. • When recessions occur, real GDP and other measures of income, spending, and production fall, and unemployment rises. ...
Handout with solution
... 7. If the economy is in long run equilibrium, an increase in autonomous consumption will: a) Lead to inflation and no change in output in the short run b) Lead to deflation and an increase in output in the short run c) Lead to no change in prices and an increase in output in the long run d) Lead to ...
... 7. If the economy is in long run equilibrium, an increase in autonomous consumption will: a) Lead to inflation and no change in output in the short run b) Lead to deflation and an increase in output in the short run c) Lead to no change in prices and an increase in output in the long run d) Lead to ...
Output and Inflation
... Nominal Variables are in terms of a current year’s prices. For example, you’re starting salary after college might be $50,000 per year. ...
... Nominal Variables are in terms of a current year’s prices. For example, you’re starting salary after college might be $50,000 per year. ...
The 3-Equation New Keynesian Model — a Graphical
... inflation in the Phillips curve could be the outcome of the imperfect availability of information or of institutional arrangements in a world where agents have rational expectations. For this reason, we prefer the more general term of inertial or backwards-looking Phillips curves since the key assu ...
... inflation in the Phillips curve could be the outcome of the imperfect availability of information or of institutional arrangements in a world where agents have rational expectations. For this reason, we prefer the more general term of inertial or backwards-looking Phillips curves since the key assu ...
Week in Focus - Investment banking
... At 4½% per year, house prices in the past three years have risen at a much stronger rate than was justified according to the model. Favourable financing costs alone cannot explain this; low real interest rates are incorporated in the model’s calculation of “fair” prices so this is already factored i ...
... At 4½% per year, house prices in the past three years have risen at a much stronger rate than was justified according to the model. Favourable financing costs alone cannot explain this; low real interest rates are incorporated in the model’s calculation of “fair” prices so this is already factored i ...
NBER WORKING PAPER SERIES Matthew Canzoneri
... systematic component of the interest-rate rule governing monetary policy. A standard neo-Wicksellian model is embedded within our model. It is obtained by stripping out the banks and assuming that only cash is useful to households in transacting. There is a money (or cash) demand equation in the neo ...
... systematic component of the interest-rate rule governing monetary policy. A standard neo-Wicksellian model is embedded within our model. It is obtained by stripping out the banks and assuming that only cash is useful to households in transacting. There is a money (or cash) demand equation in the neo ...
Contents
... response to strong domestic inflation pressures. However, interest rates in many other countries were unusually low for several years. Large global imbalances have developed, with some countries including the United States, Australia and New Zealand experiencing large current account deficits partly ...
... response to strong domestic inflation pressures. However, interest rates in many other countries were unusually low for several years. Large global imbalances have developed, with some countries including the United States, Australia and New Zealand experiencing large current account deficits partly ...
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.