Ch46 Links btw macro problems

Front

What happens to inflation from economic growth?

Back

Increased growth might cause inflation due to competition for resources, especially labor, leading to cost-push inflation.

Front

How does inflation affect the current account balance?

Back

Inflation can damage the current account balance if a country's inflation rate is higher than its trading rivals, making export prices uncompetitive and reducing net exports.

Front

What can cause inflation in relation to the current account?

Back

A surplus on the current account can cause inflation through an increase in net exports, as aggregate demand increases and puts upward pressure on domestic prices.

Front

What happens to net exports if a country has high inflation?

Back

Net exports are likely to fall, reducing growth in output.

Front

How can an increase in net exports affect the economy?

Back

An increase in net exports can lead to export-led growth and improve the current account balance, but may be offset by increased imports of raw materials needed for higher output.

Front

What is the relationship between inflation and unemployment?

Back

There is an inverse relationship; a fall in unemployment is likely to increase inflation as aggregate demand rises, putting upward pressure on prices and wages.

Front

What does the traditional Phillips curve show?

Back

The traditional Phillips curve shows the relationship between the unemployment rate and the inflation rate over time.

Front

What does the expectations-augmented Phillips curve indicate?

Back

It indicates a short-run trade-off between unemployment and inflation, but no recognizable trade-off in the long run.