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Expectations-Driven Inflation
Expectations-driven inflation is a type of inflation that arises from a shift in the Phillips curve itself, rather than a movement along it. This shift is directly caused by a change in people's expectations about the future rate of inflation.
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Economics
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Introduction to Macroeconomics Course
Ch.4 Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
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Protectionist Policy
Weaker Competition as a Type of Inflationary Supply Shock
Climate Events as Inflationary Supply Shocks
Oil Price Shocks as an Inflationary Supply Shock for Net Importers
Mechanisms of Cost-Push Inflation: WS vs. PS Curve Shifts
An economist is analyzing recent events in a country's economy. They observe three distinct developments: a sudden and severe drought has damaged major crops, leading to higher food production costs; the central bank has lowered interest rates to encourage investment; and consumer spending has increased due to a rise in household wealth. To isolate the effect of a supply-side change on the price level, which of these developments should the economist identify as the inflationary shock?
Analyzing a Government Policy's Impact on Inflation
Analyzing an Oil Price Increase as an Inflationary Shock
When analyzing an inflationary shock, such as a sharp rise in global energy prices, the standard economic approach is to assume that aggregate demand also increases, leading to a rise in both the inflation rate and the level of economic output.
Disaggregating Economic Events to Identify an Inflationary Shock
Evaluating an Economic Analyst's Statement
An economy can experience various events that lead to a rise in the overall price level. Match each economic event to its correct classification as either a supply-side shock that directly increases inflation or a demand-side change.
Differentiating Sources of Inflation
When analyzing a change that originates from the supply side of the economy, such as a sudden increase in the cost of raw materials, economists hold the ______ side of the economy constant to isolate the event's direct impact on the inflation rate.
A country that is a net importer of energy experiences a sudden, sharp increase in global oil prices. Assuming the demand side of the economy remains constant, arrange the following events in the logical sequence that describes how this supply-side event leads to a higher inflation rate.
Upward WS Curve Shift as a Source of Cost-Push Inflation
Expectations-Driven Inflation
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Mechanism of Expectations-Driven Inflation
Anchored Inflation Expectations
Consider two distinct economic scenarios. In Scenario 1, a sudden and temporary disruption to global supply chains causes a one-time increase in the price of imported goods. In Scenario 2, a central bank makes a credible announcement that it will tolerate a higher rate of price increases in the future, leading workers and firms to anticipate this higher rate in their wage and price-setting decisions. How do these two scenarios fundamentally differ in their effect on the economy's underlying trade-off between inflation and unemployment?
Analyzing Inflationary Pressures
The Self-Fulfilling Nature of Inflation Expectations
Consider an economy where, following a decade of price stability, a one-time, unexpected increase in energy prices causes the overall price level to rise for a single year before returning to its previous stable trend. This temporary price increase is best characterized as a fundamental, upward shift in the economy's underlying inflation-unemployment trade-off, driven by a lasting change in public expectations.