Inflation

ostentation AND TREND OUTPUT: USA 1960-2005 THE pilot withdraw PHILLPS CURVE The authorized Phillips Curve (A W Phillips, Economica, 1958) was about the analogy between money Wage changes and Inflation UK: 1861-1957: for %?P = 0, %?W can be > 0 ? ? + %?W ? %U ? A MODIFIED PHILLIPS CURVE alternatively of dW/W we hit pomposity (dP/P) on the vertical axis vertebra Instead of %U we have (Y/Y*) on the horizontal axis For simplicity the likeness (SP) is linear. (plausible?

) dP/P SP0 0 Y/Y* THE PHILLIPS CURVE AND SHIFTS IN AD Y/Y* = 1 where Y = Yn, U = Un LAS P Initially ? = 0 P0 AD reposition ? increased P and ? ? ?1 In fate run, AS shifts, we have LAS This implies no long run trade-off between ? and U SP is conditional on ?e 0 1 Y/Y* 0 AD1 AD0 AS1 AS0 ? SP1 Y/Y* ?1 0 SP0 ORIGINAL SR, LR PHILLPS CURVES The short and long-run responses to AD when U < Un AD stimulation: U0?U1 SP0 SP1 SP2 LP + ?2 ?1 ?0 ? ?e ? ?e1: SP ? SP1 In long run LP vertical at U0 = Un Wage behaviour and SP adjustment U1 U0 %U ? US INFLATION AND SUPPLY SHOCKS: 1970-2007 US INFLATION AND UNEMPLOYMENT: 1960-2007 INFLATION and bullion bestow Up to now we have looked at the impact of (one-off) AS and AD shocks on the set direct Inflation is a keep up increase in the general price level: it is a dynamic process continuing done time. A Supply or Demand shock big businessman school a price change, but it is difficult to serve much(prenominal) as shock as an explanation of a prolong inflation process A simple preliminary fiscal explanation: Let MV ? PY Over time: %?(MV) ? %?(PY) And as % ?V ? 0 this reduces to %?Ms = %?(PY) How th! e change in PY is class between real and nominal components can vary in SR, but in LR the > %?Ms, the > %?P MONEY AND INFLATION: information LR Ms ontogenesis AND INFLATION MsV ? PY In terms of rate of change: %?Ms + %? V ? %?P + %?Y In LR if %?V ? 0, this reduces to: %?Ms = %?P + %?Y This is in...If you want to lay a full essay, fix up it on our website: OrderEssay.net

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