Beruflich Dokumente
Kultur Dokumente
Inflation
Diya Mazumder
November 7, 2012
Focus of Macroeconomics
• What is Macroeconomics?
• Focus:
–Monitors performance of economy
as a whole
–Role of Government
Business Cycles
• What are Business Cycles?
–Depression
–Recession
–Expansions
Adult Employed
Population (146 Million)
(231.8)
million Unemployed (7.1 Million)
Distribution of the Unemployed
by Duration of Unemployment, 2007
Nature of Unemployment
• Seasonal Unemployment
• Frictional Unemployment
– What is it?
– Why is a certain amount of frictional
unemployment inevitable?
Nature of Unemployment
• Structural Unemployment
• Natural Rate of Unemployment
• Cyclical Unemployment
– Unemployment that occurs due to business
cycles
Inflation, Hyperinflation and Deflation
• Inflation: Average level of prices are rising
• Hyperinflation: Extreme case
– Case Study: Zimbabwe, Germany, Argentina
– http://www.youtube.com/watch?v=mM3_z2RB3YU&N
R=1
• Deflation:
– Average Price Levels are falling
– Case study: Japan
– Effects: Incentive to postpone consumption
Inflation Vs Relative Prices
• Relative price of a good rises when the price of a
single good rises
– Role is to adapt behavior to adjust to scarcity
• Inflation occurs when the average level of prices rises
• Price Stability:
– Occurs when aggregate price level is changing
slowly
Measure of Inflation rate
• Consumer Price Index (CPI)
– Annual Changes in CPI
– Measures how cost of an average basket of
goods and services changes over time
Computing Inflation Rate
• Fix a Basket: 4 hot dogs, 2 hamburgers
• Find the price of basket in each year
Year Price of Hot Dots Price of Burgers
2008 $1 $2
2009 2 3
2010 3 4