The triangular model of inflation, derived from the Phillips curve, identifies three types of inflation: embedded, cost-push, and demand-driven. Each type is interconnected and affects the economy differently. The triangular model of inflation is a way of looking at inflation, derived from what is known as the Phillips curve. In the triangle model, inflation is […]
An inflationary gap occurs when a nation’s real GDP exceeds its potential GDP, leading to rising prices and inflation. This can be caused by increased demand or rising production costs. Governments can control demand by raising taxes or interest rates, while supply-side advocates suggest reducing regulations and taxes. Higher taxes can also lead to decreased […]
Cost-push inflation occurs when production costs rise but demand remains the same, leading to higher retail prices. Wage increases and rising material costs are common causes. This is opposed to demand-pull inflation, which is driven by increased demand for a product. The theory of cost-push inflation is often cited in arguments against minimum wage increases. […]
Low, stable levels of inflation are preferable for economic growth. Inflation occurs when the money supply increases relative to output or the price of goods. Low inflation allows central banks to maintain tighter control over interest rates and encourages investment. High inflation can cause market instability, reduce purchasing power, and slow economic growth. Inflation and […]
Inflation reduces the purchasing power of money, causing risk to long-term investments like stocks and bonds. Investing in commodities is advised to avoid inflation risk, but it can also be dangerous. Inflation can be caused by political turmoil, resource scarcity, and inflationary psychology. Inflation occurs when the prices of goods and services rise, reducing the […]
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