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UNEXPECTED PRICE LEVEL CHANGES BA206 MACROECONOMICS GRANTHAM UNIVERSITY

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In this essay I will be answering a few questions pertaining to unanticipated or unexpected price level changes. These questions are as follows ?How will (a) an unexpected 3 percent fall in the price level in the goods and services market differ from (b) 1 percent inflation when 4 percent inflation had been expected? What impact would (a) and (b) have on the real price of resources, profit margins, output, and employment. Explain.? The fall in inflation eases the squeeze on consumer real incomes by dropping the gap between price increases and wage increases.;There is still a gap between what individuals are earning and the prices of goods and services they are purchasing, it is just that the gap is getting smaller. The decrease in the price levels in goods and services increases the purchasing power of the people.

 

Paper#20965 | Written in 18-Jul-2015

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