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The calculation for the output gap is (Y–Y*)/Y* where Y is actual output and Y* is potential output. If this calculation yields a positive number it is called an inflationary gap and indicates the growth of aggregate demand is outpacing the growth of aggregate supply—possibly creating inflation; if the calculation yields a negative number it is called a recessionary gap—possibly ...
In the case of collective bargaining, wage growth may be set as a function of inflationary expectations, which will be higher when inflation is high. This can cause a wage-price spiral. In a sense, inflation begets further inflationary expectations, which beget further (built-in) inflation. [85]
The inflationary gap between the two is the largest it's been since the 1970s. Skip to main content. Sign in. Mail. 24/7 Help. For premium support please call: 800-290-4726 more ways to ...
The last reflects inflationary expectations and the price/wage spiral. Supply shocks and changes in built-in inflation are the main factors shifting the short-run Phillips curve and changing the trade-off. In this theory, it is not only inflationary expectations that can cause stagflation.
Volcker is often credited with having stopped at least the inflationary side of stagflation, [citation needed] although the American economy dipped into a recession with the unemployment rate peaking at 10.4% in February 1983. [43] Economic recovery began in 1983. Both fiscal stimulus and money supply growth were policy at this time.
The non-accelerating inflation rate of unemployment (NAIRU) [1] is a theoretical level of unemployment below which inflation would be expected to rise. [2] It was first introduced as the NIRU (non-inflationary rate of unemployment) by Franco Modigliani and Lucas Papademos in 1975, as an improvement over the "natural rate of unemployment" concept, [3] [4] [5] which was proposed earlier by ...
Trend of monthly inflation rate in Italy, from 1962 to February 2022. In macroeconomics, a wage-price spiral (also called a wage/price spiral or price/wage spiral) is a proposed explanation for inflation, in which wage increases cause price increases which in turn cause wage increases, in a positive feedback loop. [1]
Nearly three years after Russia invaded Ukraine, Vladimir Putin's economy is entering a critical phase as inflation, shortages, and shrinking cash reserves constrain his war effort soon, a Russia ...