Result people will be reluctant to sign long term

Info icon This preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
*result: people will be reluctant to sign long-term contracts o Price confusion: suppliers can’t discern the source of price increases Is it from demand or inflation? Price goes up Increase in demand – output should go up Buy new resources Build factory Hire workers Other resources Inflation – don’t change output
Image of page 1

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

View Full Document Right Arrow Icon
All prices are affected *result: misallocation of resources Great Recession/Housing Market crash: increases in demand  and market activity was muddied by inflation o Money illusion: people interpret nominal changes as real changes Nominal wage: expressed in current wage Real wage: adjusted for price level changes Ex. Inflation in Argentina now is 30% 10% increase in wages would be an increase in nominal  wage, but a decrease in real wage because you’re not  even keeping up with inflation Earn revenue the day you start selling output Cause of inflation o Growth of the money supply o If the level of the money in the economy is growing faster than goods  and supplies you are going to get inflation Zimbabwe  Robert Mugabe
Image of page 2
03/06/2013 14:19:00
Image of page 3

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

View Full Document Right Arrow Icon
03/06/2013 14:19:00
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern