Econ Notes 4-3 - (2 Tariff increases-raise price of imports(3 Farm price support programs(4 minimum wages(5 governments mandated health insurance(6

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1 Example of Growth Inflation ^ Production A ------- ^ Employment B----- (down arrow) Unemployment C----- ^ wages /salaries/ benefits D ----- unit labor costs E ----- ^ prices But Various forces can disrupt this process by cutting one of the links connecting the events A) Can be broken by (1) ^productivity (2) ^ average work week (i) overtime (ii) part timers go to full time B) Can be broken by ^labor force from (1) Population Growth (i) Natural (ii) Immigration (2) ^ labor force participation C) Can be broken by (1) Weak unions (2) Fear of downsizing, recorprate restricting D) can be broken by ^ Productivity E) can be broken by import completion- firms many have to accept reduced profit margind when costs rise if they will lose their customers if they raise prices 3 Policy inflation (1) Sales/ exercises tax increases
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Unformatted text preview: (2) Tariff increases-raise price of imports (3) Farm price support programs (4) minimum wages (5) governments mandated health insurance (6) protectionism by non-tariff measures- 6 Outside inflation (1) Organization of Petroleum Exporting Countries OPEC oil prices 2 oil eruptions of raw materials supplies e.g. political unrest or strikes in Russia 3 Growing demand for raw materials from other countries 4 Bad weather- crop failures 5- Exchange Rate- weakening of the $- raises prices of imports 6- Inflation in the offer in other countries is transmitted though higher prices of imports 7 Growth inflation implies a tradeoff between economic growth and prices stability 1 more economic growth is desirable; it brings it the negative of inflation...
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This note was uploaded on 04/02/2008 for the course ECON 100 taught by Professor Hayworth during the Winter '08 term at Eastern Michigan University.

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Econ Notes 4-3 - (2 Tariff increases-raise price of imports(3 Farm price support programs(4 minimum wages(5 governments mandated health insurance(6

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