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Introduction To Macro_FIN-3AB_20251
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LG 1. Knowledge Comprehension
LO 1.1. Generate knowledge of core concept and theory
Monetary
authority need to manage inflation expectation. The inflation expectations will
results in a relatively stable unemployment rate
LG 1. Knowledge Comprehension
LO 1.1. Generate knowledge of core concept and theory
Monetary authority pursue contractionary monetary policy that results in higher unemployment rate.
LG 1. Knowledge Comprehension
LO 1.1. Generate knowledge of core concept and theory
The most difficult conditions to be tackled by the monetary authority is
LG 1. Knowledge Comprehension
LO 1.1. Generate knowledge of core concept and theory
Which are
the state of stagflation
LG 1. Knowledge Comprehension
LO 1.1. Generate knowledge of core concept and theory
Suppose
the monetary authority provide monetary stimulus to reduce unemployment rate
beyond the NAIRU. The unemployment rate will decrease while wage inflation
increase. In the long run, higher wage inflation increase product price. Higher
product price is not desirable because it reduce aggregate demand
LG 1. Knowledge Comprehension
LO 1.1. Generate knowledge of core concept and theory
Natural rate of unemployment is fixed.
LG 1. Knowledge Comprehension
LO 1.1. Generate knowledge of core concept and theory
If the unemployment is rising, monetary authority may print more money without the fear of inflation pressure.
LG 1. Knowledge Comprehension
LO 1.1. Generate knowledge of core concept and theory
The Phillips curve suggest that after certain threshold, reducing unemployment is not desirable because of its effect in accelerating price increase.
LG 1. Knowledge Comprehension
LO 1.1. Generate knowledge of core concept and theory
The Phillips curve in the long-run remain maintain its curvature nature.
LG 1. Knowledge Comprehension
LO 1.1. Generate knowledge of core concept and theory
The Phillips curve describe positive relationship between wage inflation and unemployment.