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Why inflation increases when real GDP is above the potential GDP?
Wiki User
∙ 15y ago
why inflation increases when real GDP is above the potential GDP
Wiki User
∙ 15y ago
Wiki User
∙ 15y agoIf you have an amount of debt, the debt can never hit zero and will keep plummeting without hitting zero. If you keep cutting your price in half, then it can never actually reach zero.
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Explain real GDP vs potential GDP?
Potential GDP is the total numerical value of GDP before inflation is counted in. Real GDP is nominal GDP adjusted for inflation
How can inflation negatively affect real wages?
It simply means that if inflation increases and real wages stay the same, it will take you more money to buy the same amount of goods and services. Inflation affects real wages because it reduces your purchasing power, assuming your real wage stays the same.
How does inflation affect investment?
The inflation affects the investment indirectly when read with the return. Example if an investment provides a return of 6%, and the inflation during the same period is 5%, the investment in real terms increases only by 1% and not by 6%, as inflation eats away returns to the tune of 5%.
How do interest rates and inflation affect real estate in south Africa?
explain how do intrest rates and inflation affect the real estate
How does inflation affect GDP?
Inflation is the primary and negative factor of all economic troubles including GDP,because it lowers consumerism, promote unemployment, and reduce import and export.-- Not quite. Inflation itself isn't necessarily a bad thing, and in fact deflation (negative price growth) can adversely affect the economy is well. High inflation can certainly hurt spending and employment, but inflation is just a term used for the growth rate of prices, which happens naturally as economies expand. The US Federal Reserve targets an inflation rate of 2-3% as a goal. Inflation has historically been a major concern in some of the developing world especially, and source of economic (and political) instability. (Source: Economics PhD student who just finished grading a paper that cited the above answer)
Explain real GDP vs potential GDP?
Potential GDP is the total numerical value of GDP before inflation is counted in. Real GDP is nominal GDP adjusted for inflation
How can inflation negatively affect real wages?
It simply means that if inflation increases and real wages stay the same, it will take you more money to buy the same amount of goods and services. Inflation affects real wages because it reduces your purchasing power, assuming your real wage stays the same.
When cyclical unemployment increases does the gap between real GNP and potential GNP increase or decrease or stay the same?
increases
How does inflation affect investment?
The inflation affects the investment indirectly when read with the return. Example if an investment provides a return of 6%, and the inflation during the same period is 5%, the investment in real terms increases only by 1% and not by 6%, as inflation eats away returns to the tune of 5%.
When would the Fed use a tight money policy?
When looking to decrease inflation, and the real GDP level is above full employment.
What are the effects of inflation on real domestic product?
What are the effects of inflation on real domestic output?
How do interest rates and inflation affect real estate in south Africa?
explain how do intrest rates and inflation affect the real estate
How does inflation affect GDP?
Inflation is the primary and negative factor of all economic troubles including GDP,because it lowers consumerism, promote unemployment, and reduce import and export.-- Not quite. Inflation itself isn't necessarily a bad thing, and in fact deflation (negative price growth) can adversely affect the economy is well. High inflation can certainly hurt spending and employment, but inflation is just a term used for the growth rate of prices, which happens naturally as economies expand. The US Federal Reserve targets an inflation rate of 2-3% as a goal. Inflation has historically been a major concern in some of the developing world especially, and source of economic (and political) instability. (Source: Economics PhD student who just finished grading a paper that cited the above answer)
2008 inflation rate?
To date the 2008 "core" inflation rate is about 4.2%. Add to that housing and energy costs and the real inflation rate is about 11.2%.
Can TVM be used to evaluate the real return or just the nominal return?
TVM, or Time Value of Money can certainly be used to calculate a real return. The only difference between a nominal return and a real return is inflation, so simply discount your future cash flows by anticipated inflation and you have a real return. In simpler terms assuming inflation is steady you could simply deduct inflation from your nominal return. For example a nominal 7% return with 3% inflation could be desribed as a 4% real return.
What is the difference between real GDP and potential GDP?
Potential GDP is the highest level of Real GDP that could persist for a substantial period with raising the rate of inflation. In other words, it is the real value of the services and goods that can be produced when a country's factors of production are fully employed. Real GDP is the Gross Domestic Product in constant prices. It is a nation's total output of goods and services, adjusted for price changes.
The real return on holding money?
inflation rate
