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GOVERNMENT AND THE ECONOMY
Prior to 1930s Little government involvement Market outcomes prevailed Periodic problems
GOVERNMENT AND THE ECONOMY
Great Depression High unemployment,
low output Causes
Stock speculationIncreases in tariffsActions of Federal
Reserve System
UNEMPLOYMENT
Measurement Monthly interviews Criteria
16 years or olderAvailable for workTried to find work
Full employment Current rate:
8.??%
INFLATION
Unanticipated inflation: Who is harmed? Lenders People with fixed incomes
Anticipated inflation
MEASUREMENT
Market Basket 2011Price $3.00/gal $4.50/lb
2012 Price 4.00/gal $6.00/lb
100 gal gas 10 lbs steak Total Cost
2011 Cost $300 $45 $3452012 Cost $400 $60 $460
Inflation Rate (460-345/345) = 33%
HYPERINFLATION
Definition: > 50%/monthJan 1.00Feb 1.50Mar 2.25April 3.38May 5.06June 7.60
July 11.39Aug 17.09Sept 25.62Oct 38.44Nov 57.67Dec 86.50Jan 129.74
HYPERINFLATION (cont)
Germany (after WWI)
1 egg MarksPre-War Price .08 Nov/1923 Price 80,000,000,000
HYPERINFLATION (cont)
Hungary (after WWII) Inflation rate:
3,810,000,000,000,000,000,000,000,000,000
GROWTH
Measurement Gross Domestic Product Dollar value of final goods and services
produced Current rate
Growing slowly