A manager needs to monitor: prices of major inputs and major outputs. This is because price change affects companies profit margin.
The Phillips Curve shows an inverse correlation between (unemployment) and (inflation) 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.
My biggest takwaway from learning about inflation is how much impact employment has on inflation rate. I had previously related it to intrest rates and other indicators such as CPI.
prices of inputs and outputs
It’s easier to pass on costs increases when the following is true:
Describe major takeaways briefly.
My biggest takeaway from accessing the impact of inflation on long term contracts, is the importance of making sure your customer can still afford the product and your prices are not running them out of business.
Describe major takeaways briefly.
While inflation is measured as accurately as possible, it is common for consumers to disagree with the CPI for being too high and economists to think that it is overstated.
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 rise in prices overtime.
Aggregate price of goods and services typically bought by urban consumers
The aggregate price of finished goods sold by manufacturers or wholesalers.
In the 1960’s William Phillip created an economic model that showed the relation between inflation unemployment.
Capacity Utilization is the extend in which a company is using its productive capacity. In other words how efferent a company is throughout the production process.
Stagflation is what occurs when inflation increases while the economic growth rate slows.
Describe the characteristics of the following events briefly.
The author writes the Phillips Curve broke down in the 1970s. Elaborate.
In 1961 using data from 1958-1961 William Phillips created the Phillips curve. This curve remained accurate up until the 1970’s when stagflation disrupted the economic model. This was due to the GDP shirking while inflation continued to increase.