A manager needs to monitor: The prices of major inputs and its outputs
The Phillips Curve shows an inverse correlation between () and () 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 workers started demanding higher wages expecting higher inflation. Higher wages pushed up the production cost, decreasing production and employment.
The major takeaways I got from this is that inflation will ruin growth in the long-term. Increases and wages and its pay will not increase entirely because of inflation.
prices of inputs and outputs
Itβs easier to pass on costs increases when the following is true:
Inflation clauses in long-term contracts allows there to be an adjustment to prices at an annual or even immediate situation because of inflation.
If we were to use the CPI / the consumer price index that will give us the best and most accurate way to be able to measure the rate of inflation
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:
Explain 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 when there is an increase in price which then makes a dollar bill not worth its value anymore
Consumer Price Index is when there is a change in price over a period of time and the customer will then have to pay it off.
Producer Price Index is when there is a change in price and a business has to pay it
The Phillips Curve is what we use to be able to show the relationship between unployment rates and inflation
Stagflation is when then the economic growth is going slow, but there is a high rate of unemployment as well as inflation
Describe the characteristics of the following events briefly.
The author writes the Phillips Curve broke down in the 1970s. Elaborate.
There was inaccuracies with-in the Phillips Curve that was coming up consistently causing a trend which then had people calling on a question to figure out how legitimate was the curve in accuracy.