ECON 102 Lecture Notes - Lecture 35: 1973 Oil Crisis, National Bureau Of Economic Research, Monetarism
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Econ 102 lecture 35 inflation: adding inflation to the model, what is inflation? i. Recession = 2 quarters of negative economic growth. Distort the p signal and allocation of resources. The allocation of resources - interfere with p signal - cause an arbitrary redistribution of income. Decrease in supply = cost push inflation. Y returns to y* at higher prices. Inflation rate = % change in cpi. Zero inflation = % change in cpi is zero (not moving) Constant inflation = stable inflation rate (constant speed) Accelerating inflation = increasing rate of change of p. Disinflation = decreasing rate of change of p. Hyperinflation = above 20: why wages change. Effect = effect of expectations or gap on nominal wages, w i. Expectation effect (increase pe increase w: workers are paid today; buy tomorrow (w~pe, expected inflation get built in to wage demands, self-fulfilling prophecy.