Inflation Issues Concerning Stimulus

Question 1

What are the consequences of inflation fears since the 70s?

Answer 1

1. Unemployment
2. Inequality
3. Curbed opportunities
4. Reduced public investment

Question 2

What is the conventional argument concerning low unemployment and inflation?

Answer 2

Low unemployment leads to higher wages, which leads to inflation.

Question 3

Why has inflation been muted since the 70s even though unemployment was low?

Answer 3

1. Watchful fed
2. Decreased workers power
3. Effects of globalization.

Question 4

What are the arguments for big stimulus?

Argument against?

Answer 4

Inflation never came even though we had extremely low unemployment. This shows that the output gap was highly underestimated. - see US unemployment of 3.5% as well as ECB struggling to create 2% inflation.

Spending far outweighs output gap. Spending could be longer term and more targeted to reverse secular stagnation.