ECON 1020H Chapter Notes - Chapter 16: Phillips Curve, Money Supply, Interest Rate
21 Jan 2016
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Chapter 16 notes for exam. Chapter 16: inflation, disinflation and deflation. The output gap is the percentage difference between the actual level of real gdp and potential output. This curve is shifted by changes in the expected rate of inflation. Econ 1020h chapter 16. Fall, 2014: deflation poses several problems. It can lead to debt deflation, in which a rising real burden of outstanding debt intensifies an economic downturn. Also, interest rates are more likely to run up against the zero bound in an economy experiencing deflation. When this happens, the economy enters a liquidity trap, rendering conventional monetary policy ineffective. Classical model of the price level. Nonaccelerating inflation rate of unemployment (nairu) The reduction in the value of money held by the public caused by inflation. The unemployment rate at which, other things equal, inflation does not change over time. A graphical representation of the negative short- run relationship between the unemployment rate and the inflation rate.
