ECON 104 11th Edition Lecture 8 Outline of Last Lecture I Unemployment II Unemployment Rate III Labor Force IV Production Possibilities Curve V Long Term Unemployment VI 4 Ways to Define Unemployment Outline of Current Lecture I Inflation a CPI b PPI II Micro Consequences of Inflation a Price Effect b Income Effect c Wealth Effect Current Lecture 1 Inflation An increase in the average level of prices NOT the increase in price for individual items a Inflation is a problem because it redistributes income b CPI Consumer Price Index is the basket of goods and services that a normal family of four consume in a given time period i Weighted by family income ii Even though we have a basket goods and services not every family consumes the same goods and services iii Everyone earns a different amount of income and a variety of assets c PPI Producer Price Index is the price of product production 2 Inflation redistributes income because we all have different jobs assets sell different products use different goods and services etc 3 Micro Consequences of Inflation a Price Effect Causes real income to decline i W Nominal Wage P Price Index Real Income b Income Effect The relative income of you and someone else c Wealth Effect The difference in assets Some people own more assets than others These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute
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