Group 6 Ch. 22
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Victor Borge - Inflationary Language

Victor Borge does the Inflationary language. He swiches every number in various words, for one number higher and then reads a text in this manner. anyone - a...
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Paul Volcker's Disinflation

Paul Volcker's Disinflation | Group 6 Ch. 22 | Scoop.it
In the late 1970's, Paul Volcker slowed the rate of growth of the money supply and raised interest rates in a disinflationary scenario. Read more about paul volcker's disinflation in the Boundless open textbook.
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Rational expectations - Wikipedia

Rational expectations

Rational expectations is a hypothesis in economics which states that agents' predictions of the future value of economically relevant variables are not systematically wrong in that all errors are random. Equivalently, this is to say that agents' expectations equal true statistical expected values.

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22-1 The Phillips Curve in the Long Run - Boundless Open Textbook

22-1 The Phillips Curve in the Long Run - Boundless Open Textbook | Group 6 Ch. 22 | Scoop.it

Friedman concluded that inflation is not related to the rate of unemployment in the long run, implying that the long run Phillips Curve is vertical. Read more about the phillips curve in the long run in the Boundless open textbook.

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22-3 Why is there a trade off between unemployment and inflation?

22-3 Why is there a trade off between unemployment and inflation? | Group 6 Ch. 22 | Scoop.it

Via Phil Hensman
ENC Team 6's insight:

-An increase in aggregate demand (AD to AD2) causes higher real GDP (Y1 to Y2), therefore firms employ more workers and unemployment falls.

-However, as the economy gets closer to full capacity, we see an increase in inflationary pressures.

-With lower unemployment, workers are able to demand higher money wages, which causes wage inflation.

-Also firms can put up prices due to rising demand.Therefore, in this situation, we see falling unemployment, but higher inflation.

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22-3 The Phillips Curve

Free learning from The Open University http://www.open.edu/openlearn/society/the-transformation-work-wales --- Bill Phillips' curve historically described an...

Via Mr Peel
ENC Team 6's insight:

In 1974, the Organization of Petroleum Exporting Countries (OPEC) began to exert its market power as a cartel in the world oil market to increase its members’ profits. The countries of OPEC, such as Saudi Arabia, Kuwait, and Iraq, restricted the amount of crude oil they pumped and sold on world markets. Within a few years, this reduction in supply caused the world price of oil to almost double.

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Mr Peel's curator insight, August 13, 2013 6:28 AM

Short animated introduction to The Phillips curve. 

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EconPort - Natural Rate of Unemployment

"The natural rate of unemployment represents the rate of unemployment to which the economy naturally gravitates in the long run.  The natural rate of unemployment is determined by looking at the rate people are finding jobs, compared with the rate of job separation."

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A New Era: Alan Greenspan - Boundless Open Textbook

A New Era: Alan Greenspan - Boundless Open Textbook | Group 6 Ch. 22 | Scoop.it
In 1987, Alan Greenspan was nominated and confirmed by the Senate as Chairman of the Board of Governors of the Federal Reserve. Read more about a new era: alan greenspan in the Boundless open textbook.
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22-2 Factors That Shift the Phillips Curve - Free Macroeconomics Video

22-2 Factors That Shift the Phillips Curve - Free Macroeconomics Video | Group 6 Ch. 22 | Scoop.it
Inflation and unemployment are directly related. In this lesson, discover the factors that lead to a shift in the Phillips Curve by looking at a...

Via Mr Peel
ENC Team 6's insight:

Decreases in aggregate supply shift the short run Phillips Curve to the right, and they include:

- An increase in expected inflation

- An increase in the price of oil from abroad

- A negative supply shock, such as damage from a hurricane

- An increase in the minimum wage.

Increases in aggregate supply shift the short run Phillips Curve to the left, and they include:

- Improvements in technology across the economy

- A decrease in expected inflation

- A decrease in the price of oil from abroad

- A positive supply shock, for example, when aggregate supply goes up because minimum wages went down.

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Mr Peel's curator insight, August 13, 2013 4:03 AM

Short, simple, but informative video looking at some of the factors that can cause the Phillips Curve to shift. Includes links to other video tutorials on The Phillips Curve. 

Mr Peel's comment, August 13, 2013 4:04 AM
A transcript is included alongside a short multiple choice quiz.
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22-2 OPEC in the 70's

ENC Team 6's insight:

OPEC (Organization of the Petroleum Exporting Countries) placed an embargo in 1973 on countries that supported Israel during the Arab-Israeli War. This included the United States. When the embargo was lifted in 1974 the price of a barrel increased from $2 to $12. Inflation in the U.S. jumped 10% and the Dow Jones dropped 45%.

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Sacrifice Ratio Definition | Investopedia

Sacrifice Ratio Definition | Investopedia | Group 6 Ch. 22 | Scoop.it
An economic ratio that measures the costs associated with slowing down economic output to change inflationary trends.
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22-1 Macro 3.1- Aggregate Demand and Supply and LRAS; Macroeconomics

Mr. Clifford explains AD, AS, and LRAS. This is the most important graph in macroeconomics, so make sure that you feel comfortable drawing and using it.
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22-3 Supply Shock in Timber

22-3 Supply Shock in Timber | Group 6 Ch. 22 | Scoop.it

A supply shock associated with the epidemic of mountain pine beetles is one of three factors which will drive a surge in timber prices throughout Canada and the United States in 2013 and beyond, a new report predicts.

 

In its latest edition of Timber Trends, The Campbell Group LLC described 2013 as the “beginning of a long term bullish trend for the timber industry.”

While this is welcome news for timber manufacturers and investors, it is not so good for builders in Canada as it will add to material costs at a time of an anticipated slowdown in housing construction.

 

“Do you remember when you were a kid and your parents told you that money didn’t grow on trees?” forest economist and report author Bruce P. Glass asked, referring to the prospects of forestry as an asset for investment.

 

“Unfortunately for you, what your parents told you was only partially true. Sure, dollar bills don’t grow on trees. But the trees themselves are worth big bucks.”

 

The report quotes Grantham Mayo van Otterloo (GMO) chief investment strategist Jeremy Grantham as saying that timber prices would rise by as much as 6.5 per cent over seven years.

 

Glass says prices could go even higher, and that three factors lie behind these expectations:

First and foremost is the mountain pine beetle bug epidemic...Combined with an increase in demand from China...Add that to demand pressures associated with a likely recovery in US housing construction...
Via Sam Radcliffe
ENC Team 6's insight:

 A "supply shock" is an event that directly affects firms’ costs of production and thus the prices they charge; it shifts the economy’s aggregate-supply curve and, as a result, the Phillips curve. For example, when an oil price increase raises the cost of producing gasoline, heating oil, tires, and many other products, it reduces the quantity of goods and services supplied at any given price level. 

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Macroeconomics: Inflation | Investopedia

Macroeconomics: Inflation | Investopedia | Group 6 Ch. 22 | Scoop.it

"When inflation is expected, agents in the economy can plan for it and act accordingly – businesses raise prices, workers demand higher wages, lenders raise interest rates and so on."

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