CHAPTER 8 OF MACROECONOMICS
CHAPTER 8 OF MACROECONOMICS 2105 025
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This 2 page Class Notes was uploaded by Christina Smith on Wednesday February 10, 2016. The Class Notes belongs to 2105 025 at Georgia State University taught by Mr. Apperson in Winter 2016. Since its upload, it has received 14 views. For similar materials see Macroeconomics in Economcs at Georgia State University.
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Date Created: 02/10/16
CHAPTER 8 Deflation: When inflation is negative Occurs when overall prices fall Inflation creates uncertainty for firms and workers Inflation is the growth in prices Consumers may change buying patterns We measure inflation through the bureau of labor statistics (also tracks unemployment). Consumer Price Index (CPI) How much a typical consumer spends The basket of goods are kept the same Measure of price level based on the consumption patterns of a typical consumer Chained CPI: A measure of the CPI in which the typical consumer’s “basket” of goods considered is updated Shoe leather Costs: The resources that are wasted when people change their behavior to avoid holding money. Money Illusion: Occurs when people interpret nominal changes in wages or prices as real changes Nominal Wage: His or her wage expressed in current dollars Menu Costs: The costs of changing prices Output: The production that a firm creates Capital Gains: Taxes on the gains realized by selling an asset for more than its purchase price. Concerns: Substitution: When the price of A rises, we buy more B Quality Changes: Flat screen TVs vs. 1990s TVs New goods and services Countries with very high inflation: Venezuela, Ukraine, South Sudan, and Yemen. The Seven costs of Inflation: 1. Shoe- Leather costs 2. Money Illusion 3. Menu costs 4. Future price level uncertainty 5. Wealth redistribution 6. Price Confusion 7. Tax Distortion
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