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Macroeconomics Final - Ch. 30
Definitions from the Ragan Lipsey Canadian Macroeconomics book
9
Economics
Undergraduate 1
04/14/2011

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Term
Inflation
Definition
A rise int he average level of all prices. Usually expressed as the annual percentage change in the Consumer Price Index
Term
Rational Expectations
Definition
The theory that people understand how the economy works and learn quickly from their mistakes so that even though random errors may be made, systematic and persistent errors are not
Term
Demand Inflation
Definition
Inflation arising from an inflationary output gap caused, in turn, by a positive AD shock.
Term
Supply Inflation
Definition
Inflation arising from a negative AS shock that is not the result of excess demand in the domestic markets for factors of productions
Term
Acceleration Hypothesis
Definition
The hypothesis that when real GDP is held above potential, the persisten inflationary gap will cause inflation to accelerate
Term
Expectations-Augmented Phillips Curve
Definition
The relationship between unemployment and the rate of increase of money wages that arises when the output-gap and expectations components of inflation are combined
Term
Disinflation
Definition
A reduction in the rate of inflation
Term
Stagflation
Definition
The simultaneous increase in inflation and reduction in output (or its growth rate) that is caused by an upward shift of the AS curve.
Term
Sacrifice Ratio
Definition
The cumulative loss in real GDP, expressed as a percentage of potential output, divided by the percentage-point reduction in the rate of inflation
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