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Inflation is a general and sustained rise in the level of prices over two financial quarters in an economy. The government is worried about inflation because it has negative repercussions on its ability to achieve its macro- economic objectives.
For example, inflation could result in higher unemployment. Firms seek to cut costs during a period of inflation and could lay off workers.
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What term do economists use to describe the second outcome of inflation?
Economists refer to the second outcome of inflation as "cost-push inflation." This occurs when rising production costs, such as wages and raw materials, lead to an increase in prices for goods and services. Cost-push inflation can result in reduced economic growth and increased unemployment, as higher prices can decrease consumer demand.
What do government economists focus on?
Government economists work for federal, state, and local governments in a wide variety of positions involving analysis and policy making.
Who do Most economists believe that the main credit for bringing inflation under control in the early 1980s belongs to?
Congress
What do economists call the percentage change in real GDP from one year to the next?
Growth rate, adjusted for inflation.
What did the existence of low inflation and low unemployment in 1900s puzzle some economists?
Because unemployement fell to its lowest level in decades, and inflation crept along at less than 3%
What do government economists focus on?
Government economists work for federal, state, and local governments in a wide variety of positions involving analysis and policy making.
Economists believed that the main credit for bringing inflation under control in the early 1980s belonged to?
C.Congress
Some economists argue that at low levels of GDP lower than the long-run level of output?
Some economists maintain that under the conditions of a liquidity trap. Today, most economists favor a low and steady rate of inflation.
Who do Most economists believe that the main credit for bringing inflation under control in the early 1980s belongs to?
Congress
What do economists call the percentage change in real GDP from one year to the next?
Growth rate, adjusted for inflation.
What did the existence of low inflation and low unemployment in 1900s puzzle some economists?
Because unemployement fell to its lowest level in decades, and inflation crept along at less than 3%
How can macro economists use the micro economic theory to guide them in their work?
economic theory can guide the economists to solve macroeconomic issues such as inflation, unemployment, deflationary and inflationary gaps, budget deficits etc.
How can one calculate the expected inflation rate?
To calculate the expected inflation rate, one can use economic indicators such as the Consumer Price Index (CPI), Producer Price Index (PPI), and inflation expectations surveys. By analyzing these factors, economists can make predictions about future inflation rates.
What do theoretical economists study?
Theoretical economists, employing mathematical models, develop theories to examine major economic phenomena, such as the causes of business cycles or inflation or the effects of unemployment, energy prices, or tax laws.
Most economists believed that the main credit for bringing inflation under control in the early 1980s belonged to?
The Federal Reserve Board
What of these concepts was proven by the neoclassical economists?
interference from governments had been harmful to the growth of economies during the nineteenth century
If inflation falls why would unemployment rise?
When economists look at inflation and unemployment in the short term, they see a rough inverse correlation between the two. When unemployment is high, inflation is low and when inflation is high, unemployment is low. This has presented a problem to regulators who want to limit both. This relationship between inflation and unemployment is the Phillips curve. The short term Phillips curve is a declining one. Fig 2.4.1-Short term Phillips curveThis is a rough estimation of a short-term Phillips curve. As you can see, inflation is inversely related to unemployment. The long-term Phillips curve, however, is different. Economists have noted that in the long run, there seems to be no correlation between inflation and unemployment.
