ECO 1102 Chapter Notes - Chapter 6: Money Supply, Gdp Deflator, Nominal Interest Rate

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9 Jun 2014
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ECO 1102 Full Course Notes
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Inflation refers to a situation in which the economy"s overall price level is rising. The inflation rate is the percentage change in the price level from a previous period. The consumer price index (cpi) is a common measure of the price level. Canadian inflation has been: similar to that in other industries, lower than that in developing countries. Stagflation: a special case of inflation, where an increase in prices is always accompanied by a decrease in gdp. Inflation redistributes as well as reduces purchasing power. Money supply: growth in the money supply (currency and bank deposits) exceeds the growth of goods and services. Exchange rates: value of one currency in terms of another currency; changes may affect the cost of purchasing goods and services from other countries. Cost-push inflation: increases in production costs (wages), which results in higher prices. Demand-pull inflation: the demand for goods and services grows faster than their production.

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