ECON 2 Lecture Notes - Lecture 23: Money Supply, Market Basket, Stagflation
Document Summary
Occurs when there is a sustained mild rise in the price level per year i. e. between one and six per cent. Occurs when there is a big increase in price. It is a situation in which prices are rising at high and unpredictable rates. Occurs when prices increase at intermediate rates (between the two types above) Occurs when there are no barriers to price rise and no government controls. Refers to a situation where demand exceeds supply, but the effect in prices is minimized through the use of instruments like price controls and rationing of essential goods by government. The symptoms of this type of inflation include long queues, black markets and diversion of scarce resources away from essential producing industries to other industries. Occurs when price increases are accompanied by declining output producing unemployment. It arises from a situation in which aggregate demand persistently exceeds aggregate supply at current prices.