ECON 1010 Chapter Notes - Chapter 28: Phillips Curve, Real Business-Cycle Theory, Output Gap
12 Jan 2015
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Chapter 28 canadian inflation, unemployment, and business cycle. For inflation to proceed, aggregate demand must persistently increase: therefore, quantity of money must persistently increase, cost-push inflation an inflation that is kicked off by an increase in costs. Increase in the money prices of raw materials. The two main sources of cost increases are (aggregate supply and decreases): Stagflation a combination of a rising price level and decreasing real gdp: bank of canada can increase quantity of money to fix unemployment rate. If ad grows fast, it behaves like a demand-pull inflation. If ad grows slow, inflation rate slows unemployment, consists of short run and long run. Phillips curves: mainstream business cycle theory potential gdp grows at a steady rate while aggregate demand grows at a fluctuating rate. Technological change makes a sufficient amount of existing capital obsolete, therefore productivity can temporarily fall. Decrease in demand for loanable funds lowers the real interest rate.
