Lecture 14 Notes

Lecture 14 Notes - ECN 211 Macroeconomic Principles L14:...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
03/03/10 1 ECN 211 Macroeconomic Principles L14: Inflation and Aggregate Demand
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
03/03/10 2 Inflation … a sustained increase in the average level of prices The higher the price level the lower the real value of money Purchasing power of a dollar is eroded. Standard argument with parents and allowances…. Hyperinflation … an extremely high rate of inflation E.g. Zimbabwe. Can cause a “flight from money”.
Background image of page 2
Calculating Inflation 03/03/10 3 Year Price Index (CPI) Inflation Rate (%) 2001 88 - 2002 93 5.68 2003 100 7.53 2004 104 4.00 2005 106.5 2.40 2006 110 3.29 2007 118 7.27
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
03/03/10 4 Types of Inflation Demand-Pull Inflation ….. Increases in total spending that are not off set by increases in the supply of goods and services at the original price therefore the average level of prices must increase Tends to happen when an economy is at/near maximum capacity. Prices have to increase ration the goods …. “too much money chasing too few goods”
Background image of page 4
Cost-Push Inflation increases in production costs that cause firms to raise prices to avoid losses cost increases are passed on to buyers leading to a spiral in prices. (wage/price spiral) Oil shocks in the 70’s (and recently) 03/03/10 5
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6 Costs of Inflation Menu Costs Costs associated with firms having to introduce changes in prices. E.g. print new menus.
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/03/2010 for the course ECN 211 taught by Professor Kingston during the Spring '08 term at ASU.

Page1 / 22

Lecture 14 Notes - ECN 211 Macroeconomic Principles L14:...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online