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A significant argument for the augmentation has to do with concept of money illusion. Money illusion means that you care about nominal rather than real amounts. Imagine that your salary increases by 20% over one year. Does this mean that you can increase your consumption? The answer is that it relies on the inflation. If inflation is 20%, you can consume as much as you did before. You should actually decrease you consumption if inflation exceeds 20%. We say that you have suffer from money illusion if you believe that you are better off if your salary increases by 20% whereas prices also increase by 20%. A higher nominal salary may create the ‘illusion' that you are richer.
If employees suffer from money illusion they will only care about nominal wage increases, expected inflation won't matter and there is no reason for traditional Phillips curve not to hold. If, though, they don't suffer from money illusion, ?wshould depend on both U and Πe and augmented Phillips curve is more realistic.
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discuss the action the procurement function should take to achieve raw materials at economic cost durin inflation
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Hi, I need help with my Aplia macroeconomics problem sets.
Define the term- inflation Inflation between two points in time is defined as the percentage increase of price index between these two points in time.
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Economist mark Edward the multiplier effect of Alaska trade to Japan another 600 million is added to the state economy for Japanese recovery, associated press and local wire June 2
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