RSM100Y1 Midterm: MIDTERM REVIEW Part 1(C)
Document Summary
Inflation: not as bad as depression (unless it"s hyperinflation), but still harmful, the uncertainty of the value of money shows up as high interest rates, which make entrepreneurs less willing to build new plants or start new business. In early 1980s, us central bank moved to cut money supply growth, canada followed: then a huge recession, but inflation came down to about 5% In 1989-91, canada and us moved to lower inflation again: us inflation moved down to 3%, while canada had an inflation target of 2%, and sometimes lower. Present goal of central banks: targets: keep inflation low and steady by adjusting the money supply and interest rate, monetary policy has become the chief method of stabilizing" the eco. Internationalization: during depression, it was the learned that trade restriction make all countries worse off. In late 1990s most eu members adopted a common current (the euro") Encourage this by high barriers to trade and tight regulations on imports.
