CHAPTER 18 Causes of Long-Term Growth and Inflation Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-1 Three Stages of Production Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-2 Generalized Relationship between Inputs and Output Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-3 Postponing Diminishing Returns Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-4 The Power of Compounding: Effects of Compounding $1 for 515 Years Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-5 How Governments Can Promote Economic Growth Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-6 How Governments Can Impede Economic Growth Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-7 GDP relationship 1: Nominal GDP ≡ P × Q Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-8 GDP Relationship 2: Nominal GDP M2 ì V2 Copyrightâ 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-9 V2 Is a Derived Value Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-19 Monetarism: Inflation Is a Monetary Phenomenon Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-20 Short-Run Phillips Curve Relationship Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-21 U.S Phillips Curve Relationship, 1959–1968 Source: U.S Department of Labor, Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, Consumer Price Index, http://www.bls.gov/data/home.htm (accessed January 30, 2006) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-22 U.S Inflation and Unemployment, 1959–2006 Source: U.S Department of Labor, Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, Consumer Price Index, http://www.bls.gov/data/home.htm (accessed October 14, 2006) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit M18-1 Labor Market Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-23 The Natural-Rate Hypothesis Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-24 Long-Term and Short-Term Phillips Curves, 1959–2006 Source: U.S Department of Labor, Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, Consumer Price Index, http://www.bls.gov/data/home.htm (accessed October 10, 2006) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18-25 Changes in the Natural Rate of Unemployment Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A18-1 Changes in the Natural Rate of Unemployment Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A18-2 Monetary Rule: Target Inflation Rate=0% Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A18-3 Can Falling Real GDP Cause Long-Term (30%) Inflation? Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A18-4 Can Rising Velocity Cause Long-Term (30%) Inflation? Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A18-5 Can Rising Velocity and Falling Real GDP Cause Long-Term (30%) Inflation? Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A18-6 Can Rising Money Supply Cause Long-Term (30%) Inflation? Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A18-7 Inflation in Argentina and Turkey Caused by Excessive Money Growth* Source: IMF, International Financial Statistics Online, http://ifs.apdi.net/imf/about.asp (accessed June 6, 2006) *The money supply figures in Exhibit A18-7 come from the IMF’s ‘‘Money’’ and ‘‘Quasi-money’’ statistics Money is defined as currency outside depository banks and demand deposits other than those of the central government Quasi-money is defined as liabilities of financial institutions, comprising time, savings, and foreign currency deposits of resident sectors other than central government Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved ... a part of Cengage Learning All rights reserved Exhibit A1 8-2 Monetary Rule: Target Inflation Rate=0% Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A1 8-3... South-Western, a part of Cengage Learning All rights reserved Exhibit M18-1 Labor Market Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 18- 23 The Natural-Rate Hypothesis... Can Falling Real GDP Cause Long-Term (30%) Inflation? Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A1 8-4 Can Rising Velocity Cause Long-Term (30%) Inflation?