Key Concepts: The Phillips Curve, The
Role of Expectations, Credibility and Time Inconsistency, Sources of Business
Cycles, The Link Between Monetary and Fiscal Policies
S. Morgan Friedman—The Inflation
Calculator
Enter "1000" for the amount of money, "1970" for the
initial year, and "1980" for the final year. Click "Submit" to run the inflation
calculation.
- Explain how inflationary expectations can be formed and sustained in an
economy.
- How does inflation affect real wages? Explain how current inflationary expectation
may influence future wage contracts?
- Review historical global crude oil
prices. Assess
how the "unexpected" shock of increasing crude oil prices in 1970s
may have affected the inflation and wage relationship in the U.S.
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