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Copyright © 2006 Pearson Addison-Wesley. All rights reserved. Chapter 8 Inflation: Its Causes and Cures.

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Presentation on theme: "Copyright © 2006 Pearson Addison-Wesley. All rights reserved. Chapter 8 Inflation: Its Causes and Cures."— Presentation transcript:

1 Copyright © 2006 Pearson Addison-Wesley. All rights reserved. Chapter 8 Inflation: Its Causes and Cures

2 Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 8-2 Figure 8-1 The Inflation Rate and the Output Ratio, 1960–2004

3 Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 8-3 Figure 8-2 Relationship of the Short-Run Aggregate Supply (SAS) Curve to the Short-Run Phillips (SP) Curve

4 Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 8-4 Figure 8-3 Effect on the Short-Run Phillips Curve of an Increase in the Expected Inflation Rate (p e ) from Zero to 3 Percent

5 Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 8-5 Table 8-1 Alternative Divisions of 6 Percent Nominal GDP Growth Between Inflation and Real GDP Growth

6 Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 8-6 Figure 8-4 The Adjustment Path of Inflation and the Output Ratio to an Acceleration of Nominal GDP Growth from Zero to 6 Percent When Expectations Fail to Adjust

7 Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 8-7 Figure 8-5 Effect on Inflation and Real GDP of an Acceleration of Demand Growth from Zero to 6 Percent

8 Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 8-8 Figure 8-6 Initial Effect on Inflation and Real GDP of a Slowdown in Nominal GDP Growth from 10 Percent to 4 Percent

9 Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 8-9 Figure 8-7 Adjustment Path of Inflation and Real GDP to a Policy That Cuts Nominal GDP Growth from 10 Percent in 1980 to 4 Percent in 1981 and Thereafter

10 Copyright © 2006 Pearson Addison-Wesley. All rights reserved International Perspective Did Disinflation in Europe Differ from That in the United States?

11 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-8 The Inflation Rate and the Output Ratio, 1980–95

12 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-9 Four-Quarter Growth Rate of the GDP Deflator and the Level of Nominal and Real Oil Prices, 1970–2004

13 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-10 The Effect on the Inflation Rate and the Output Ratio of an Adverse Supply Shock That Shifts the SP Curve Upward by 3 Percent

14 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-11 Effect of Adverse Supply Shocks in the 1970s and Beneficial Supply Shocks in the 1990s

15 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-12 Responses of the Inflation Rate (p) and the Output Ratio (Y/Y N ) to Shifts in Nominal GDP Growth and in the SP Curve (1 of 2)

16 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-12 Responses of the Inflation Rate (p) and the Output Ratio (Y/Y N ) to Shifts in Nominal GDP Growth and in the SP Curve (2 of 2)

17 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-12 Responses of the Inflation Rate (p) and the Output Ratio (Y/Y N ) to Shifts in Nominal GDP Growth and in the SP Curve

18 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-13 The U.S. Ratio of Actual to Natural Real GDP (Y/Y N ) and the Unemployment Rate, 1965–2004

19 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-14 The Unemployment Rate and the Inflation Rate, 1960–2004

20 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-15

21 Copyright © 2006 Pearson Addison-Wesley. All rights reserved Figure 8-16


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