Home
> Macro, Monetary Policy > An equation linking inflation, output growth, unemployment and money growth

## An equation linking inflation, output growth, unemployment and money growth

Here we are going to make a single equation out of three other expressions:

1. The Phillips Curve which linked inflation to unemployment: .

2. Okun’s Law which linked unemployment to output:

3. The relationship between nominal money growth, output growth and inflation:

You can combine the first two to get:

.

Now you can substitute the value for output growth given in the third equation into that to get:

.

Now for some multiplying out of whats in the brackets:

.

.

.

.

.

We can put the right hand side back in brackets to get:

Advertisements

Categories: Macro, Monetary Policy

Comments (0)
Trackbacks (0)
Leave a comment
Trackback