Price Stability, Employment, and Growth

TOPIC I: Inflation

OBJECTIVES: 
  1. identify reasons for a shifting Aggregate Supply curve.
  2. define the characteristics and causes of inflation.
  3. use the Aggregate Demand/Aggregate Supply Model (AS/AD) to explain inflation and inflationary recessions.
  4. define and explain the concept of the Phillips Curve
  5. explain and use adaptive expectations hypothesis and rational expectations hypothesis to explain inflation and inflationary recessions.
  6. identify and explain strategies for ending inflation.

KNOW THE FOLLOWING TERMS

Demand Pull Inflation 

Cost Push Inflation 

Supply shock

Inflationary recession 

Adaptive Expectations Hypothesis

Rational Expectations 

New Classical Economics

Hyper-inflation 

Phillips Curve

KEY CONCEPTUAL QUESTIONS

  1. What are the causes of inflation?
  2. What models can be used to describe and prescribe for inflation?
  3. What policies best combat inflation?