Price Stability
Autor: Abygail Reynolds • July 24, 2015 • Course Note • 2,423 Words (10 Pages) • 697 Views
ECONTWO
1
Micro
- Individuals (Buyer)
- Sellers (Companies
- Market Equilibrium
- Market structure - Industry
Macro
- Aggregate
- Household
- Business Sector
- Government
Goals in Macro Economic Policy
- Price Stability – Inflation → Increase in general price level → Money Supply ↑
- Sustainable Economic Growth
- Full Employment
Price Stability
- To measure success, inflation rate must e kept at single digit (less than 10%)
- An increase in price levels will reduce the value of money
- Inflation rate is measured every month
- Inflation rate – measures the overall increase in price level in a given time period
Tao – Bank – Company – Price
10 % wage vs. 0% inflation
↓Demand -↓Price-↑Demand
Deflation in Japan 1990
Life Expectancy
Saving vs. Spending
Saving → Government
66 % Dependent
34 % 18-64
↓Demand = ↓Price = ↓Q Supply = ↓ # of worker = ↑unemployment = ↑ Government Rely = ↓Interest Rate 0.000001%
Iceland – 7 to 8 %
Economy Collapsed
Largest Denominated Note
Zimbabwe – One Hundred Trillion Dollars
2
World Bank – Long term loans
International Monetary Fund – Short term loans
- Interest
- Policy Recommendation
- Economic Policies
How do we measure inflation rate?
Government uses a “basket of goods” to determine the increase in price level
Basket of goods is composed of different commodities such as food, clothing, oil, transport, utilities etc.
Ex. May 2013 – P100
2014 – P110
Inflation 10%
Basket of Goods
2000 | 2006 | |
Food, Beverage & Tobacco | 40.97% | 43.47% |
Clothing | 2.96% | 3.36% |
Housing, Fuel, Light & Water | 22.46% | 23.70% |
Services | 18.36% | 15.72% |
Miscellaneous | 15.25% | 13.75% |
Price Stability in the Philippines
Inflation Rate
Headline Inflation – Increase in the Basket of goods
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