14 terms

Chapter 9: Price Stability

STUDY
PLAY
Stability of Prices
critical to economic growth because people make expectations based on future prices
Inflation
a sustained increase in general level of prices in the economy
Demand-pull Inflation
caused by excess aggregate demand
Cost-push Inflation
caused by high costs of goods and services
Deflation
sustained reduction in the general level of prices
Disinflation
reduction in rate of inflation
Stagflation
rising price level (inflation) and lower GDP (stagnation)
U.S. oil consumption per unit of real GDP
declined 50% because of technology advances and fuel-efficient machinery
Phillips Curve
relationship between inflation rate and unemployment
Short Run Phillips Curve
the expected inflation rate and natural employment rate are constant
Long Run Phillips Curve
relationship between inflation and the unemployment rate when inflation = expected inflation rate; vertical
Domestic Price Instability
may cause international price instability
Inflationary Impact
importing inflation through the higher-rated foreign products
Inflation Rate
(P1 - P0)/ P0 x 100
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