which problem is greater: inflation or unemployment?
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Which problem is greater: inflation or unemployment?. What is inflation?. Inflation-sustained general rise in prices. Measures of inflation. Types of inflation. Creeping inflation-prices rise few percent every year Hyper-inflation- large increases in price each year. - PowerPoint PPT PresentationTRANSCRIPT
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Which problem is greater: inflation or unemployment?
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What is inflation? Inflation-sustained general rise in prices
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Measures of inflation
Inflation rate-change in average
prices in an economy over a given period of
time.
Retail Price Index(RPI)
Consumer Price Index(CPI)
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Types of inflation Creeping inflation-prices rise few percent
every year Hyper-inflation- large increases in price
each year
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Inflation rate formula
Price index for year t
Price index for previous year
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2007 2008 2009 2010 2011 2012 2013
-5
0
5
10
15
20
25
2007-2013 Inflation rates(CPI)
UkraineRussiaGreat BritainChinaSouth KoreaUsa
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Causes of inflation:
Inflation
Demand-pull
Cost-push
Structural(Demand-shift)
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Examples of inflation:Germany 1921-1923
• Was caused by the war.• 7 000 000 000 000% in 1923• Other countries that suffered inflation at
that time-Austria, Hungary, Poland, USSR
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Serbia and Montenegro 1993-1995
Yugoslavia broke. Government printed money. Unemployment rose to 30% New currency “Dinar” was created. Inflation 5 000000000000000%(quadrillion) 12 Nov. 93 1 Deutsch mark=1million new
dinars 15 Dec.93 1DM=3.7 billion new dinars End of December 1DM=3 trillion new dinars. New new dinar created Novi dinar eliminated inflation
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Zimbabwe 2004-2008
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Unemployment Unemployed-those of working age who
are without work, but who are available for work at current wage rates
Labour force-those who are employed and unemployed.
UK government definition: Unemployed-people of working age who are without work, available to start working within 2 weeks and actively seeking employment, or waiting to take up an appointment
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Feb 2013European Unemployment Data, courtesy of Eurostat
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Types of unemployment Voluntary and Involuntary Frictional Unemployment Cyclical Unemployment Structural Unemployment Seasonal Unemployment
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Costs of unemployment To employee-loss of earnings Lack of money cause problems in families Government gets less taxes (VAT) Firms lose profits Workers lose additional wages(higher
output) General increase of violence and crime
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Unemployment
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USA inflation and unemployment rates during the 1960s
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Summary: Inflation and unemployment are essential
for economy Depending on inflation, unemployment
changes. Inflation is more crucial to control.
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Sources http://index.minfin.com.ua/index/infl/ http://www.inflation.eu/inflation-rates/chi
na/historic-inflation/cpi-inflation-china.aspx
Sloman,J. Economics Pearson 2012 8th edition
Anderton A. Economics Causeway press 2007, 4th edition
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Thank You!