🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeClass Notes1,200,000US530,000

ECON 2305 Lecture Notes - Lecture 10: Fisher Hypothesis, Neutrality Of Money, Seigniorage

55 views4 pages
erinbat720
7 Dec 2016
School
University of Houston
Department
Economics
Course
ECON 2305
Professor
Arpita Chakravorty

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

This increase in the overall level of prices is called inflation; which drives up prices. Economists measure the inflation rate as the percentage change in the consumer price index (cpi), the gdp deflator, or some other index of the overall price level. A rise in the price level means a lower value of money because each dollar in your wallet now buys a smaller quantity of goods and services. P is the price level as measured, by cpi or gdp deflator. Then p measures the number of dollars needed to buy a basket of goods and services. Now turn this idea around: the quantity of goods and services that can be bought with equals 1/p. In other words, if p is the price of goods and services measured in terms of money, 1/p is the value of money measured in terms of goods and services. We can use price index for thousands of.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

ECON 2305 Lecture Notes - Lecture 12: Stagflation, Potential Output, Menu Cost
erinbat720
ECON 1BB3 Chapter 11: Macro_Chp11
greycrocodile755
ECON 1BB3 Chapter Notes - Chapter 6-9: Nominal Interest Rate, Gdp Deflator, Real Interest Rate
ochrealligator278

Related Questions

Measures of Inflation The GDP deflator is the broadest, most inclusive measure of change in the country's price level since it includes all final goods and services produced and sold. But the GDP deflator is not used by the government or economists as the benchmark measure of inflation; instead, the consumer price index (CPI) is used to determine changes in the cost of living. What is the shortcoming of the GDP deflator as a measure of inflation for households, and why is the CPI considered to be a more useful measure?

when economists refer to the economy’s price level, they mean

A. The rate of inflation.

B. The price of goods and services relative to consumers' incomes.

C. A general measure of prices of all goods and services.

D. A period of level, or steady, prices.

E. The prices of a specific consumer good.

A. A decrease in aggregate supply can result in:

  1. a recession
  2. cost-push inflation
  3. demand-pull inflation
  4. unemployment 

B. In the short run (intermediate-range) of the aggregate supply curve, higher aggregate demand will increase

  1. the price level but reduce real GDP.
  2. real GDP without raising the price level
  3. the price level without affecting real GDP
  4. both the price level and real GDP

C. Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?

  1. As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services
  2. As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services
  3. As prices fall, the government will have to reduce taxes, which will lead to an increase in the number of goods and services purchased
  4. As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the number of goods and services purchased