Tvorba hospodárskej politiky a makroekonomické väzby inflácie
ECONOMIC POLICY MAKING AND MACROECONOMIC RELATIONSHIPS OF INFLATION

Summary/Abstract: In this article we focus on inflation. The level of inflation in Slovakia could potentially complicate efforts to meet Maastricht criterion. The low GDP per capita requires high economic growth. Therefore the article begins with a discussion of the nature of inflation – a general increase in price level. The theory has agreed upon that changes in both ag-gregate supply and aggregate demand are the sources of inflation. Looking at the known model of aggregate supply and demand (Fig. 1), one can see how an increase in demand can raise the price level. The rise in the price level is caused by the outward shift of ag-gregate demand along the rising portion of the aggregate supply schedule. Then we dis-cuss how a rise in the price level can be caused by the contraction in aggregate supply or supply shock. In other words, the worsening of aggregate supply conditions raises the price level with no change in aggregate demand conditions (Fig. 1). Our analysis sug-gests an important difference between inflation driven by increases in demand and infla-tion driven by reductions in supply. In the case of aggregate supply shifts, output falls as price rise. In the case of aggregate demand shifts, there is an increase in output as prices rise. In the analysis we stressed that this latter case suggests the existence of an important trade-off. Increases in aggregate demand will induce higher level of output, but at the cost of higher prices. There will be an inflation. By this analysis we have shown the possible problems of the Slovak economy in the field of inflation. The economic policy has not been based on the theory. Our next analysis concentrates on the wages, prices and productivity. An economic policy in Slovakia has allowed an increase of general price level of goods and services but wages were constant. We tried to develop a relationship in movements of wages, inflation and productivity. Our aim was to deduce the basic wage- price – productivity relationship. We derived it from the version of the labor market equilibrium condition W = P.f(N). Using mathematical techniques we have come to an important conclusion. If W grows at the same rate so that , will be 0, that is the equilibrium price level will remain unchanged. This is an important knowledge, rule for wage increases, saying that the wage rate can grow as fast as productivity with no change in equilibrium price level.

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