October 9th - Inflation cont.

October 9th - Inflation cont. - product True const of...

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Inflation Cost Push inflation Look at picture. Look at senses.gov Decrease in prices for fall and winter items especially clothing. Look in two different ways the ways the way this impacts the economy. Macro Impact of Inflation. However it is still different for everyone. People buy different items, have different assets and investments. While looking at inflation we must look at our income as well as inflation to see how inflation affects us. Inflation could help if the assets they own inflate with inflation. With inflation there is also an increase in transfer because the producer is getting more money for his
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Unformatted text preview: product. True const of inflation is redistribution of wealth. The three reasons that it leads to Redistribution of Wealth W- Income P- Price 1. Price Effect – Decline in Real income : W(doesn’t Change)/P(Goes up) = Decline 2. Income Effect – W1(don’t change)/P(increase by 10%) = decline and W2(increase with inflation)/P(increase by 10%) wages don’t always keep up with inflation thus one worker is now less better off even though his wages don’t change. 3. Wealth Effect...
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This note was uploaded on 09/09/2011 for the course ECONOMICS 104 taught by Professor Crocker during the Fall '08 term at UMass (Amherst).

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