On Tuesday in econ101b we looked at inflation alongside unemployment for the first time. We're going to return to these later in term in more detail, but for now we thought a little about the different types of inflation (CPI, GDP deflator, producer price inflation and wage inflation), and also the theoretical concepts of demand-pull and cost-push inflation.
Simon Wren-Lewis, who I've mentioned previously, blogs today on inflation, and in particular the idea that we're about to see a 1970s style explosion in inflation. As Simon points out, it isn't fools that are warning about this - he links up to Andrew Sentance, who until recently was on the Monetary Policymaking Committee (more later in term on what this does - suffice to say for now it does what it says on the tin).
A regularly aired concern is that because of quantitative easing (again, more later in term), which can be described in a simplification as printing money, inflation is just around the corner - once people spend all that money that's out there.
Wren-Lewis though makes an astute observation - wage inflation has been lower than price inflation, something I pointed out in the lecture yesterday - which means that people simply don't have the extra money to spend, which may then lead to inflation - what happened in the 1970s, as Wren-Lewis's graphs show.
Wages are increasing at a slower rate than the general price level, which means that we are all getting poorer in terms of what we can actually afford with our wages - which means we are unlikely to start spending more, a precursor to higher inflation (aggregate demand increasing).
This blog accompanies the econ101ab Principles of Economics course given at the University of Birmingham. The lecturers for both parts of the course (101a, microeconomics and 101b, macroeconomics) will occasionally post here on matters related to lecture material. We hope to show the relevance of the concepts we are teaching at each stage of the course for helping understand how the world works...
Showing posts with label Simon Wren-Lewis. Show all posts
Showing posts with label Simon Wren-Lewis. Show all posts
Thursday, January 10, 2013
Monday, January 7, 2013
Borrowing
As I mentioned in today's lecture, amidst the administrative and technological chaos, this blog serves to link what we look at in the lectures to the real world. I'm not the only lecturer that does this, and so I'll regularly post interesting and useful blog posts by other economists.
Simon Wren-Lewis lectures in Oxford, and writes a blog called Mainly Macro which is a treasure trove of well written and thought out contributions. He's written yesterday on the "B word", borrowing, and it's a nice response to those, often on the political right, who oppose any kind of suggestion of borrowing.
Well worth a read.
Simon Wren-Lewis lectures in Oxford, and writes a blog called Mainly Macro which is a treasure trove of well written and thought out contributions. He's written yesterday on the "B word", borrowing, and it's a nice response to those, often on the political right, who oppose any kind of suggestion of borrowing.
Well worth a read.
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