A Note on Income Inequality and Macro-economic Volatility
Income inequality may influence macro-economic variables by affecting the money multiplier and the trade-off between inflation and output. In an AD-AS model with imperfect foresight income inequality intensifies the volatility of output and inflation rate by increasing the likelihood of oscillations as well as their magnitude. Volatility is, however, moderated when income inequality prolongs the business cycles.
|Date of creation:||2000|
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