Inflation-sustained general rise in prices Inflation rate-change in average prices in an economy over a given period of time. Retail Price Index(RPI) Consumer Price Index(CPI) Creeping inflation-prices rise few percent every year Hyper-inflation- large increases in price each year Price index for year t Price index for previous year 25 2007-2013 Inflation rates(CPI) 20 15 Ukraine Russia Great Britain 10 China South Korea Usa 5 0 2007 -5 2008 2009 2010 2011 2012 2013 Demand-pull Inflation Cost-push Structural(Demandshift) • • • Was caused by the war. 7 000 000 000 000% in 1923 Other countries that suffered inflation at that time-Austria, Hungary, Poland, USSR Yugoslavia broke. Government printed money. Unemployment rose to 30% New currency “Dinar” was created. Inflation 5 000000000000000%(quadrillion) 12 Nov. 93 1 Deutsch mark=1million new dinars 15 Dec.93 1DM=3.7 billion new dinars End of December 1DM=3 trillion new dinars. New new dinar created Novi dinar eliminated inflation Unemployed-those of working age who are without work, but who are available for work at current wage rates Labour force-those who are employed and unemployed. UK government definition: Unemployedpeople of working age who are without work, available to start working within 2 weeks and actively seeking employment, or waiting to take up an appointment Feb 2013 European Unemployment Data, courtesy of Eurostat Voluntary and Involuntary Frictional Unemployment Cyclical Unemployment Structural Unemployment Seasonal Unemployment To employee-loss of earnings Lack of money cause problems in families Government gets less taxes (VAT) Firms lose profits Workers lose additional wages(higher output) General increase of violence and crime Unemployment USA inflation and unemployment rates during the 1960s Inflation and unemployment are essential for economy Depending on inflation, unemployment changes. Inflation is more crucial to control. http://index.minfin.com.ua/index/infl/ http://www.inflation.eu/inflationrates/china/historic-inflation/cpi-inflationchina.aspx Sloman,J. Economics Pearson 2012 8th edition Anderton A. Economics Causeway press 2007, 4th edition