Literature Review Of Inflation

Long term economic developments may be identified with expansion, as inflations may increase. Inflations usually increase the cost of products on sale, and as the costs are higher, it will be an issue to the nationality in question to be able to buy their needs There is a limited amount of time involved in the growth of an economy as it involves an increase in GDP. The hypothesis and practice are both diverse. The hypothesis is the thing that economists are able to figure out for themselves; however, to be able to use the hypothesis in reality is the main task. Utilization of the hypothesis is something that really happens at some point.

Inflation is divided into two categories Cost-push and Demand pull inflation: Cost-push inflation means that prices have been hiked up by increases in costs of any of the four factors of production such as (labor, capital, land or entrepreneurship) when companies are already running at maximum production capability. With higher production costs and productivity at it maximum, companies cannot maintain profits by producing the same amounts of goods and services. As a consequence, the increased costs are passed on to customers, causing a rise in the overall price level (inflation). Demand-pull inflation occurs when there is an increase in collective demand, categorized by the four sections of the macro economy: governments, households, businesses and foreign buyers.

Workers may not realize immediately that their purchasing power has fallen due to quickly rising prices, but over time, their expectations and understanding changes and they begin to supply less labor, thus resulting in the natural rate of unemployment and high inflation. Phelps illustrates this phenomenon in his expectations-augmented Phillips Curve. His contributions have better explained the relationship between unemployment

Additionally, trading volume should increase when the price of an IPO with a negative initial return exceeds the offer price for the first time. Kaustia (2004) finds support for the aggregate impact from the disposition effect on the subsample of negative initial return IPOs. Kaustia (2004) states that trading volume is clearly suppressed below the offer price for negative initial return IPOs, and turnover increases significantly at the time the stock price exceeds the offer price for the first time and continues to get higher while the stock is trading above the offer price. In this paper I inspect IPO trading volume and have some different findings that trading volume is significantly suppressed below the offer price for IPOs in 2003-2007 which is defined as the before-crisis period in Section 2 of this paper, and the effect does not continue to be significant during the following weeks since the offer. In addition, this paper also finds that trading volume is not significantly suppressed below the offer price for IPOs in the after-crisis period (details of period definition are discussed in Section 2).

Consider the economy enters a recession, thus the government automatically moves into a budget deficit. In order to balance this deficit, the government would have to raise taxes or cut spending, but both of these actions would reduce aggregate demand, making the recession worse. Now assume GDP increases above its potential level, the budget is automatically moved into surplus. To eliminate this surplus, the government would have to cut taxes or increase spending. These actions would increase aggregate demand, thereby pushing GDP even further beyond potential GDP and increase the risk of higher inflation.

Inflation is an increase in general price levels and has undesirable impacts on households and firms which means the government is justified to use policies to maintain price

“As inflation rises, every dollar you own buys a smaller percentage of a good or service. When prices rise, and alternatively when the value of money falls you have inflation” (Hayes). For this reason a minimum wage increase would never work. If employers are paying employees more then they will raise costs to offset the added expenses. This will cause the buying power of the dollar to decrease, making it so people who received the minimum wage increases will not be making any more money than they otherwise would’ve, and people who did not have their pay increased, will be making even less money then they had used too.

The economic logic behind protectionist immigration agendas is that an increased population increases the labor supply and stops there. In this scenario, the equilibrium wage rate of labor supply and labor demand would be lower than the pre-immigration equilibrium wage rate, and the logic holds. Instead, separating scenario from real-world application would present previously unaccounted for effects. Being so, what actually occurs is as follows. As before, as the population increases with immigration, the labor supply would also increase, but the increased population would also lead to increased consumer spending and demand (i.e. money flowing into the US economy).

• If PE ratios show how much growth (Montagne is growing better and faster) o Sterling expenses are going more than depreciation which is lower than Montagne o Expected to have Montagne PE to be higher (not only by a 0.2 difference) • PE of Montagne is so low and PE of Sterling is so high because it is over valued o Very diversified with beta • [Exhibit 1]

The Yinfl line on the graph represents the point that is greater than potential output. The increase in aggregate demand is caused by an increase in demand by consumers, firms, government, and foreign countries - leading to inflation. Inflation has consequences such as redistribution effects, uncertainty about the future economy by consumers and firms, menu cost, and may lead to export competitiveness, as well as, lead to inappropriate spending decisions known as money illusion. The last and most costly consequence of inflation is the significant impact that will occur with hyperinflation.