chapter 26 the dynamics of inflation and employment

Chapter 26 the - CHAPTER 26 The Dynamics of Inflation and Unemployment Lecture Outline 1 The impact of money growth on the inflation rate 2 The

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

View Full Document Right Arrow Icon
CHAPTER 26 The Dynamics of Inflation and Unemployment
Background image of page 1

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

View Full DocumentRight Arrow Icon
Chapter Twenty-Six 2 of 26 Lecture Outline 1. The impact of money growth on the inflation rate 2. The impact of inflation expectations on interest rates 3. The relationship between unemployment and inflation: the expectations Phillips curve 4. Factors that shift the natural rate of unemployment 5. How central bank credibility affects inflation 6. The relationship between the money supply, the velocity of money and the nominal income: the quantity equation of money FYR
Background image of page 2
Chapter Twenty-Six 3 of 26 Inflation in a Steady State Money illusion : confusion of real and nominal magnitudes Expectations of inflation : the beliefs held by the public about the likely path of inflation in the future.
Background image of page 3

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

View Full DocumentRight Arrow Icon
Chapter Twenty-Six 4 of 26 Inflation Expectations and Money Demand If the public expects 5% inflation a year, then its demand for money will also increase by 5% a year. As long as the central bank allows the supply of money to increase by 5% - the same amount as inflation - the demand for money and its supply will both grow at the same rate, then real interest rates and nominal interest rates will not change.
Background image of page 4
                 Chapter Twenty-Six 5 of 26 The Expectations Phillips Curve:  The Relationship between  Unemployment and Inflation Expectations Phillips curve The relationship between unemployment and inflation when taking into account expectations about inflation. Involves the notion that unemployment varies with unanticipated inflation .
Background image of page 5

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

View Full DocumentRight Arrow Icon
                 Chapter Twenty-Six 6 of 26 Are the Public’s Expectations about Inflation Rational? Two broad classes of theories of how the public forms its expectations: The public uses simple rules-of-thumb to predict future inflation.
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 02/12/2012 for the course ECON EC1101 taught by Professor Ms during the Spring '08 term at National University of Singapore.

Page1 / 26

Chapter 26 the - CHAPTER 26 The Dynamics of Inflation and Unemployment Lecture Outline 1 The impact of money growth on the inflation rate 2 The

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