A manager needs to monitor:
Managers need to monitor the different inflation rates for different goods. These relationships can then be exploit by the managers.
The Phillips Curve shows an inverse correlation between (inflation rate) and (unemployment rate) using data from 1861 - 1958. It implies the Fed could achieve low unemployment at the cost of high inflation.
The Phillips Curve broke down in the 1970s when Lyndon Johnson inaugurate Great Society social programs while the Fed kept interest rates low.
So is there a tradeoff between inflation and unemployment? Milton Friedman and Edmund Phelps says:
Describe major takeaways briefly.
The Federal Reserve can only temporarily reduce unemployment. Low inflation is preferable to high inflation. There is no long-term tradeoff between inflation and unemployment that policymakers can exploit to reduce unemployment. The Federal Reserve policy is to keep inflation low.
prices of inputs and outputs
It’s easier to pass on costs increases when the following is true:
Describe major takeaways briefly.
Describe major takeaways briefly. Long-term contracts should include an price-adjustment clause to prevent effects from things like inflation. These adjustments still need to be beneficial to both parties. Also needs to cover an wide variety of events.
A business for whom raw materials constitute a major cost should hedge against the risk of sharp increases in the price of raw materials by:
Explan each of the following terms in your own words. The author explains the terms in the textbook. If necessary, you may also Google the term on the Web. Good resources include:
Explain the terms in your own words briefly.
Inflation is the rate of increase in price over a certain time period.
CPI is a measurement of the average spending of a consumer for specific goods/services
PPI is a measurement of the average selling price of specific goods/services
The Phillips Curve is a economic concept of the relationship between inflation and unemployment rate
Capacity utilization measure the actual output being realized by an organization.
Stagflation is a period in time where both slow economic growth and high unemployment rate coexist with rising inflation.
Describe the characteristics of the following events briefly.
The author writes the Phillips Curve broke down in the 1970s. Elaborate.
The Phillips Curve’s breakdown relates to how people stopped valuing money over their own pleasure. Instead of seeking high paying jobs, people wanted job that had more nominal values.