Unit 6

• Stagflation- high inflation combined with high unemployment and stagnant demand in a countries economy
• Deflation - reduction of the general level of prices in an economy
• Disinflation - decrease in the rate of inflation, slowdown in the rate of increase of the general price level of goods and services.
• Inflation - general level of prices for goods purchasing power of currency is falling
• Causes of adverse supply side shock would be rising oil prices, bad weather and decline in productivity. This causes an unexpected increase in cost or disruption to production
• Demand pull inflation is the result of increase in total spending without any accompanied =
• Cost push inflation is the result of negative shocks to total production capacity. Increase unemployment and reduced production capacity
• Supply side economics focus on the expansion of the long run supply curve. Less government (taxes and spending)
• Economists call the knowledge and skills that make a worker productive a human capital.
• Major measure of economic growth is changes in real GDP per capita