Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
20 Cards in this Set
- Front
- Back
Inflation Rate
|
rate at which average price is increasing over time (period to period percentage increase in average price) |
|
Two Types of Inflation
|
Demand pull; Cost Push
|
|
Two reasons for growth in the economy |
Capital accumulation (more capital per co worker); technical progress (less costly ways of producing goods)
|
|
Demand Pull Inflation |
When the % change in AD (aggregate demand) over time is greater than the % change in AS (aggregate supply) over time... AD>AS *creates increase in price |
|
EQN of exchange
|
MV=PQ *% change in money supply + % change in velo = % change in Avg Price + % change in production |
|
How can a country bring inflation rates down?
|
easy, just lower the growth rate of money supply
|
|
Hyperinflations
|
when the monetary authority allows the money supply to increase at astronomical rates |
|
what increases with inflation rates |
Velocity
|
|
Phillips Curve
|
an inverse relationship between a countrys unemployment rate and its inflation rate
|
|
what causes for cost push inflation
|
higher production costs or decreases in AS (aggregate supply) over time |
|
what causes higher production costs
|
higher input prices (higher wage, energy prices, material prices, etc.)
|
|
what does real wage indicate |
the goods and services that can be purchased witht the nominal wage
|
|
Nominal Wage |
sum of money an individual is paid for supplying one unit of labor = (Hourly Wage)
|
|
calculate real wage |
Wage/Price of single product |
|
Deflating
|
any procedure for canceling out the effect of average price of something
|
|
How to adjust nominal wage
|
(Nominal wage / CPI) x 100 |
|
Unemployment Equation
|
U = (QLS - QLE)/QLS x 100%
|
|
Cyclical Unemployment
|
A woker laid off and then not willing to come back to employment, (usually because of lower wages; often from a recession) *voluntarily unemployed |
|
natural unemployment
|
the unemployment rate when the labor market is in equilibrium (lowest unemployment rate acceptable without institutional changes) |
|
How to eliminate Cyclical Unemployment
|
use monetary and fiscal policies
|