Mindblown: a blog about philosophy.
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Summary
9.1 Tracking Inflation Economists measure the price level by using a basket of goods and services and calculating how the total cost of buying that basket of goods will increase over time. Economists often express the price level in terms of index numbers, which transform the cost of buying the basket of goods and services into…
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Indexing and Its Limitations
Learning Objectives By the end of this section, you will be able to: When a price, wage, or interest rate is adjusted automatically with inflation, economists use the term indexed. An indexed payment increases according to the index number that measures inflation. Those in private markets and government programs observe a wide range of indexing arrangements. Since the…
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The Confusion Over Inflation
Learning Objectives By the end of this section, you will be able to: Economists usually oppose high inflation, but they oppose it in a milder way than many non-economists. Robert Shiller, one of 2013’s Nobel Prize winners in economics, carried out several surveys during the 1990s about attitudes toward inflation. One of his questions asked, “Do…
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How the U.S. and Other Countries Experience Inflation
Learning Objectives By the end of this section, you will be able to: In the last three decades, inflation has been relatively low in the U.S. economy, with the Consumer Price Index typically rising 2% to 4% per year. Looking back over the twentieth century, there have been several periods where inflation caused the price…
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How to Measure Changes in the Cost of Living
Learning Objectives By the end of this section, you will be able to: The most commonly cited measure of inflation in the United States is the Consumer Price Index (CPI). Government statisticians at the U.S. Bureau of Labor Statistics calculate the CPI based on the prices in a fixed basket of goods and services that represents…
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Tracking Inflation
Learning Objectives By the end of this section, you will be able to: Dinner table conversations where you might have heard about inflation usually entail reminiscing about when “everything seemed to cost so much less. You used to be able to buy three gallons of gasoline for a dollar and then go see an afternoon…
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Introduction to Inflation
Figure 9.1 Big Bucks in Zimbabwe This bill was worth 100 billion Zimbabwean dollars when issued in 2008. There were even bills issued with a face value of 100 trillion Zimbabwean dollars. The bills had $100,000,000,000,000 written on them. Unfortunately, they were almost worthless. At one point, 621,984,228 Zimbabwean dollars were equal to one U.S. dollar. Eventually, the…
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Summary
8.1 How Economists Define and Compute Unemployment Rate Unemployment imposes high costs. Unemployed individuals experience loss of income and stress. An economy with high unemployment suffers an opportunity cost of unused resources. We can divide the adult population into those in the labor force and those out of the labor force. In turn, we divide those…
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What Causes Changes in Unemployment over the Long Run
Learning Objectives By the end of this section, you will be able to: Cyclical unemployment explains why unemployment rises during a recession and falls during an economic expansion, but what explains the remaining level of unemployment even in good economic times? Why is the unemployment rate never zero? Even when the U.S. economy is growing…
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What Causes Changes in Unemployment over the Short Run
Learning Objectives By the end of this section, you will be able to: We have seen that unemployment varies across times and places. What causes changes in unemployment? There are different answers in the short run and in the long run. Let’s look at the short run first. Cyclical Unemployment Let’s make the plausible assumption…
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