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# Ch9.1 - 1 Chapter 9 Inflation Activity and Nominal Money...

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1 Chapter 9 Inflation, Activity, and N i l M G th Nominal Money Growth

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O G Output Growth, Unemployment and Inflation 1
1.1 Introduction 3 This chapter builds on three relations between output, unemployment and inflation. Okun’s Law shows how output growth affects the change in unemployment change in unemployment. The Phillips curve shows how unemployment affects the changes in inflation affects the changes in inflation. The aggregate demand relation relates output th i l th d i fl ti growth, nominal money growth and inflation.

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Introduction 4 Fi 9 2 Figure 9 - 2 Output Growth, Unemployment, Inflation, and Nominal Money G th Growth
Notes: Approximations 5 The growth-of-a-product rule. The growth rate of a product is equal to the sum of the growth rates of its components components. Eg. z=xy g z g x + g y The growth-of-a-quotient rule. The proportional change of a quotient is equal to the difference change of a quotient is equal to the difference between the proportional changes of its components. Eg. z=x/y g z g x - g y

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Notes: Approximations 6 The growth-of-a-power rule. The proportional change of a quantity raised to a power is equal to the proportional change in the quantity times the power to which it is raised. Eg. z=x y g z yg x