GDP Dean

Marginal propensity to consume

Marginal meaning extra or a change in. MPC equals a change in consumption over change in income

Marginal propensity to save

A change in saving over a change in income

Real balances effect

A higher price level reduces the real value or purchasing power of the public's accumulated savings balances.

Cost push inflation and real output

Cost push inflation reduces real output. It redistributes a decreased level of real income. Abrupt and unexpected rises in key research prices such as oil can sufficiently drive up overall production costs to cause cost push inflation.as prices rise, the quantity demanded of goods and services Falls. Firms respond by producing less outputs, and unemployment goes up.

Demand pull inflation and real output

Demand pull inflation is when there is too much demand or money circling around for the desire of a particular product that is scarce. The amounts of demand for this particular product will drive up the price. Only those who have the resources to purchase this product will gain it.

Who is hurt by inflation

Fixed income receivers are people who is incomes are fixed. they're real incomes fall when inflation occurs. Minimum-wage workers and families living on a fixed welfare incomes also will be hurt by inflation. Unanticipated inflation hurts savers as prices rise the real value or purchasing power of an accumulation of savings deteriorates. Finally unanticipated inflation harms creditors which are lenders. Suppose a bank Lens $1000 to be repaid into years. If in that time the price level doubles the $1000 repaid will have only half the purchasing power of the $1000 he borrowed. As prices go up The purchasing power of the dollar goes down. So the borrower pays back less valuable dollars then those received from the lender.

Who is unaffected or helped by inflation?

Flexible income receivers - people who have flexible incomes mate is scape insulations harm or even benefit from it. People who derive their incomes solely from Social Security are largely unaffected by inflation because Social Security payments are indexed to the CPI. Benefits automatically increase when the CPI increases preventing erosion of benefits from inflation. Some union workers also got their automatic COL a's in their pay when the CPI rises. Some flexible income receivers and all borrowers are helped by on anticipated inflation also, some business owners may benefit from inflation is product prices rise faster than research prices, business revenues will increase more rapidly than costs. Unanticipated inflation benefits dub tutors who are the borrowers.

What is hyperinflation

Hyperinflation is extraordinarily rapid inflation, and can have a devastating impact on real output and employment. When prices go up sharply and even the during hyperinflation, people began to anticipate even more rapid inflation and normal economic relationships are disrupted. Businesses owners do not know what to charge for their products. Their menu costs will constantly change. Could consumers do not know what to pay. Their confidence will reduce. Suppliers want to be paid with actual output, rather than with rapidly depreciating money. Money eventually becomes almost worthless and ceases to perform its job as a medium of exchange. Businesses, anticipating further price increases, may find the hoarding both materials and finish products is profitable. Individual savers may decide to buy nonproductive well - Jules, gold, and other precious metals, real estate, and so forth - rather than providing funds that can be borrowed to purchase couple equipment. The economy may be thrown into a state of barter and production and exchange drop further.

Reasons why aggregate demand has a downward slope

In micro economics demand has a downward slope because of the substitution effect and the income effect in aggregate demand. In macro economics aggregate demand shifts downward because of real balances effect, interest rate effect, and foreign purchases effect.

Nominal interest rate equation

Real interest rate + inflation premium ( The expected rate of inflation)

Average propensity to save

The fraction of total income that is saved APS= saving/income

Average propensity to consume

The fraction or percentage of total income that is consumed. APC equals consumption/income

Nominal interest rate

The percentage increase in money that the borrower pays the lender including that resulting from the built in expectation of inflation if any.

Real interest rate

the percentage increase in purchasing power that the borrower pays the lender.