How might rapid inflation affect college enrollments

Document Type:Essay

Subject Area:Social Work

Document 1

If all prices increased at the same rate (i. e. , no relative price changes), would inflation have any redistributive effects? When there is the same increase in all prices, the prices of the goods and services will not change significantly. This means that there are no redistributive effects of inflation since there are similarly no effects on the income, price and wealth. It is these different effects that form part of redistributive properties of inflation that occur due to altered relative prices. Could demand-pull inflation occur before an economy was producing at capacity? How? Yes, there is inflation in demand-pull when consumers make an attempt to buy more items that are being produced by the economy. It is possible that the economy can produce more in terms in terms of its capacity to produce when the demand increases to the extent that it surpasses the current levels of production in the economy.

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This leads to increased prices pressure. It is possible to have later reemployment of idle capacity which makes the prices return to their past levels ceteris paribus. If business cycles were inevitable, what purpose would macro policy serve? The main role of macro policy would be to create a balance the business cycles in terms of size and length. There was a great recession that led to a global decline in an AD in 1929. This went on until the end of the WW II. As a result of increased spending during the war, it led to a massive increase in the AD. When the war came to an end in 1946, the extent of spending by the government reduced leading to the subsequent reduction in the AD.

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As a result, there was an increase in the real GDP again due to the need a lot of expenses for post-war reconstruction in Europe and Japan alongside increased spending by consumers in the US. Why do rich people have a higher marginal propensity to save than poor people? Rich people have higher MPS and thus lower MPC that lead to not spending the additional income earned. When income is increased for poor people, they still end up spending it. How do households dissave? Where do they get the money to finance their extra consumption? Can everyone dissave at the same time? Households dissave when the income is lower than consumption and consumptions are thus done through the use of credits or past incomes in the form of savings.

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When this happens, money can be borrowed from financial institutions that include banks or get involved in spending money that had been saved. It is not possible for everyone to dissolve at the same time since they tend to have varied budgets at different times. Why are declining housing permits considered a negative leading indicator? The ability to build few houses is one of the investment concepts that affect AD. Constructing many houses increases the investment and the AD. Thus declining housing permits leads to the reduced buildings within a period hence the lowered demand for investment and a weak AD. Therefore, declining housing permits becomes a negative leading indicator. Why wouldn’t market participants always want to buy all the output produced? The fact that they make purchases on an independent basis that is determined by a number of factors.

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Once consumers opt to save their money and not to spend it most of the piled up inventories in the stores are noticed by the suppliers leading to the reduction of output by producers. In turn, the production reduces and the rate of unemployment increases. How can equilibrium output exceed full-employment output? In an economy that is experiencing some equilibrium that is greater than the full employment equilibrium, there is the likelihood of depletion of the inventories. At this point, they do not want to lose the opportunities presented for sales thus the need for businesses to restore their inventories. This makes it important for the business to have hired workers or those who work overtime or both of them. Why might “belt-tightening” by consumers in a recession be unwelcome? During a recession, the belt-tightening by consumers is acceptable because it is at this time that the real GDP is lesser than the GDP for full employment.

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