ECO102H1 Lecture Notes - Lecture 16: Nominal Interest Rate, Real Wages, Phillips Curve
45
ECO102H1 Full Course Notes
Verified Note
45 documents
Document Summary
Inflation: money growth and inflation (review, an inflation fallacy, redistributive effects of (unanticipated) inflation. Detailed discussion of inflation shocks, disinflation, phillips curve, policy response: not required, required [only] - if there is an inflationary gap: Government policy [monetary, fiscal] can reduce ad and eliminate inflationary gap. The inflation rate expected by individuals and firms. The difference between actual inflation and the anticipated rate of inflation. Why is inflation bad : a common misperception, the truth : unanticipated inflation redistributes income and creates winners and losers . Inflation robs people of the purchasing power of their incomes. If price level doubles (inflation of 100%) then incomes in total must double as well. [100% inflation] mary pays john to mow lawn. If price level doubles, not everyone"s income will double, so (unanticipated) inflation creates winners and losers . Workers, firms: concern is with real level of wages.
