I mean, I do realise there is some sort of link, but what I think what I don't get is:
Is it generally inevitable for an economy that is experiencing economic growth to simultaneously experience inflation?
Basically, does an economy that experiences economic growth will also always experience inflation?
I mean, from what I gather is that yes inflation will occur because when an economy is doing well, prices tend to rise.... I think?
Or is it that growth causes inflation? Or inflation that undermines growth? I
'm so confused.
2007-11-25 23:39:56 · 5 answers · asked by Anonymous in Social Science ➔ Economics
The Philips curve was found empirically in the 1950 showing that there is a correlation between economic growth and wage. increases. However during the high inflation period of the 70's the relationship broke down, so now economists believe this only to be true only for small rates of inflation.
Most macroeconomic theories are based on these empirical facts.
2007-11-26 00:08:18 · answer #1 · answered by meg 7 · 3⤊ 0⤋
An Old world economy the two were linked tightly in macro economics. In the global econ the link is not as tight because of arbitration. Endless producers undercutting each other, smart web enable consumers who shop for discounts, etc all drive the price down. Inflation is based on supply and demand, as demand rises the supply shrinks and thus the cost goes up. China has done lots to keep away inflation. To understand modern global macro economics google "global economics" and you will see there is no shortage of matterial.
2007-11-26 08:16:19 · answer #2 · answered by Iwasthere 3 · 0⤊ 1⤋
macro models have many factors for growth to contribute to total growth (housing, cars, agricultural, oil, services etc)....in the meantime people spend their disposable money as they see fit.....so if housing growth makes everything skew to growth....yet demand is causing competition for oil and making the markets bid up the price and it causes inflation....at the same time there could be a deflation on autos as people are not happy with what is offered by the auto dealers at their prices and terms...so in real world it is a flow of growth/recession and inflation and deflation
2007-11-26 08:30:41 · answer #3 · answered by Philip T 4 · 0⤊ 1⤋
You have the general ideas correct.
2007-11-26 07:43:26 · answer #4 · answered by Anonymous · 0⤊ 1⤋
yes u r right.there is a link between them.
2007-11-26 07:48:20 · answer #5 · answered by Kannan 1 · 0⤊ 1⤋