Sunday, October 26, 2008

Low Inflation - Questions for Further Study


1. Chile experienced hyperinflation in 2005. What was the inflation rate? What caused Chile’s hyperinflation?

2. Go to the web site for the Bureau of Labor Statistics ( to find historical U.S. inflation data. Is there a correlation between high inflation rates of inflation and U.S. involvement is wars? What explanation does economic theory provided for this correlation?

3. Stagflation is the economic condition of having relatively high unemployment and inflation at the same time.
(a) Since cyclical unemployment is caused by insufficient aggregate demand and demand-pull inflation is caused by excessive aggregate demand, how is it possible to have stagflation?
(b) What remedies might you suggest for stagflation?
(c) Which is the greater concern: high unemployment or high inflation?
(d) When has the U.S. economy experienced stagflation? What were its causes? How was it remedied?

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