Which of the following about the natural rate of unemployment is true?

a. it is the rate that prevails when actual inflation exceeds anticipated inflation.

b. if the actual rate of unemployment is above the natural rate, inflation rate will increase.

c. if the natural rate of unemployment is below the natural rate, the inflation rate will decrease.

d. the long run phillips curve analysis suggests that any attempts to reduce unemployment below the natural rate will only result in higher rates of inflation.

Which of the following about the natural rate of unemployment is true?

D

What Is Inflation-And How Does It Affect Our Economy?

Today 16 Jan 07 the Government put up our inflation rate to a eleven year high.

What is inflation? (I know it effects our everyday purchases)

What is the purpose of inflation?

Thank you

What Is Inflation-And How Does It Affect Our Economy?

If you have ten pounds and kept it under your mattress for a year you will find out that you can buy less things with the same ten pounds note. That is because prices went up.

The current rate of inflation is around 2 % that mean that you need to make an extra 2 % a year more money to maintain your living standard.

Interest rate has to be above the rate of inflation other wise you are not making any money if you leave your money in the bank. There is no real purpose of inflation it just happens because there is an increase in the money supply. For example if the Bank of England decides to print an Extra billion pounds for no reason the actual value of the pound will go down. This is exactly what happened in Russia i think in 1998.

The government does not make the rate of inflation, it just try to keep it low.

I think you are confusing interest rate with inflation!

I hope that i explained it clearly.

Why do people think inflation is low now? Don't they buy their own groceries, gas, home, or car

The necessities of life are pretty expensive. Is there an inflation rate available that factors those in to give a true rate of inflation or cost of living?

Why do people think inflation is low now? Don%26#039;t they buy their own groceries, gas, home, or car?

Hmmm it IS pretty low right now - check me if Im wrong on that.

Obviously medical costs do blow right now and thats a big concern, but overall inflation is fairly low.

They calculate it using a market %26quot;basket%26quot; - a random assortment of common goods. Unfortunately Im not sure how fair this %26quot;basket%26quot; is. It could be outdated or unrealistic.

Why do people think inflation is low now? Don%26#039;t they buy their own groceries, gas, home, or car?

Yes they are factored in. Inflation is low. Why do you refuse to accept good news?

Why do people think inflation is low now? Don%26#039;t they buy their own groceries, gas, home, or car?

I don%26#039;t know what people are thinking. If they would just read a newspaper like the Wall Street Journal they would know that inflation is only going to go up. I personally think that it is high now.

Why do people think inflation is low now? Don%26#039;t they buy their own groceries, gas, home, or car?

Only single people are unaware of the real cost of living.

Why do people think inflation is low now? Don%26#039;t they buy their own groceries, gas, home, or car?

Inflation is as low as the vice president is not part of the executive branch.

CPI&inflation?

The consumer price index(CPI) measures the increase in the price of the marktet basket between the current year and the base year i.e. CPI is used to calculate inflation rate. Can inflation be oberstated by CPI?

CPI%26amp;inflation?

inflation is overstated by the CPI because it does not adjust for quality or the substitution effect.

CPI%26amp;inflation?

Inflation _CAN_ be overstated by CPI by selecting a basket of goods where the average price increase is higher than the increase in the money supply. However, in practice, CPI is reported by the government and the government knows that most people understand that inflation is bad. Therefore the incentive for government is everywhere and always to understate CPI. Unsurprisingly, if you chart CPI against M3 (which the government no longer wishes to report), guess which is higher?

Economics/Inflation part 2?

Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Describe how this unexpectedly high inflation rate would help or hurt the following:

a. the government

b. a homeowner with a fixed mortgage

c. a union worker in the second year of a labor contract

d. a college that has invested some of its endowment in government bonds

Economics/Inflation part 2?

Same variant applies to each question. Think about it for a minute and you%26#039;ll understand.

Hint: As a homeowner with a fixed mortgage, I LOVE inflation.

Economics/Inflation part 2?

Bad answer?! I think not, chief.

Fixed mortgage means my interest rate on principle will not increase. If inflation increases above my interest rate, then I am coming out ahead, particularly as I pay off principle. Report It

Economics/Inflation part 2?

Quite simply, my fixed mortgage rate is the cost of borrowing while inflation rate is my rate of return. The wider the gap between rate of return and cost of borrowing = profit to me. Report It

What would be your recommendation for fighting inflation?

I mean how do we invest our money in order to fight inflation. Don%26#039;t tell me that you accept our government official report on inflation rate: 2%. I believe this year, the inflation rate is more then 10%.

What would be your recommendation for fighting inflation?

Most people never agree on this BUT to me, the safest way (of course not so effective but still something) to REDUCE inflation is to put your money in the fixed deposit. At current rate, it will cut down inflation by about 3% for the money you have. This is a low risk low gain strategy for people who are risk adversed but it guarantees your success.

For people who want high gain (with high risk for sure), dump your money in all the investments you can find like share, unit trust, properties, business etc. These are the best options according to the salesmen who want you to buy their investment products. High gain always accompanies by high gain and don%26#039;t be surprised and don%26#039;t curse the salesmen if you get nothing or even lose money (multiplied inflation rate?!).

There is no guarantee of success here because, if the plan is so damn good, do you think anyone wants to sell it to you?

Real inflation rate is definitely higher than 2%, just compare all the prices of our necessary household items few years ago and now. Everybody can come out with their own inflation rate by plugging different figures as basis. E.g. inflation rate goes down by 50%, just look at the laptop price now and last time ... %26quot;BOLEH!%26quot;.

What would be your recommendation for fighting inflation?

i didnt know that.. thanks for telling me.

Interest Rates & Inflation & shares?

How are interest rates related to or affected by inflation and vice versa.

Also how do either of these or both affect shares?

Please can you offer any websites that can help further explain the above (ideally with direct links to them)

Thank you x

Interest Rates %26amp; Inflation %26amp; shares?

Short term interest rates are influenced by the fed funds rate, which is set by the Federal Reserve. This rate is the rate at which banks themselves do short term borrowing, and thus has a big impact on the velocity of money. The fed raises and lowers this rate in an attempt to control inflation. Long term rates are set by market forces, largely based on expectations of future inflation. the Fed also has the power to engage in %26quot;free market operations%26quot;, meaning that they can buy or sell treasury securities for the purpose of influencing rates.

Share prices are very difficult to explain in any specific case. But in a very general sense, the current price of a stock can be thought of as the discounted value of future company earnings. As interest rates increase, the present value of future earnings decreases, and thus the share price drops. That%26#039;s why the market hangs on every word Bernanke utters.

Interest Rates %26amp; Inflation %26amp; shares?

Interest rates are controled by fed bank to stablise the economy. when interest rates go higher, people tend to save more %26amp; borrow less, therefore less investment %26amp; more saving, since a guaranteed income from interest is always better than any unknown return from stocks so more tend to keep saving being scared of another increase or uncertainity of the future. (usually house hold mortgages are controlled by variable interest rates as well, so it adds a worry to mum %26amp; dad investors)

once interest rates go higher, investments go lower, less new business open (due to higher cost of borrowing), higher unemployment (due to less new business opening), less spending on credit card %26amp; inflation tends to lower.....due to lower spending of consumers which makes retailers push their products pricing down to attract more customers.

the connection between all that %26amp; shares is in 2 aspects, borowing to invest %26amp; the opportunity cost of trading shares vs putting money in interest account in bank.

if cost of borrowing money to invest in share market gone higher by higher interest then people tend to borrow less %26amp; invest less %26amp; tend to put money in banks to get a chance of higher banks.

I tried to make it as readable as possible so I hope it helps :)

cheers,