Business cycle phase and inflation

CFA Level III Economics
#1

Hello, can someone help me with the following?

  1. Initial recovery: why is inflation decelerating?

  2. slowdown: why is inflation rising?

  3. contraction: why is inflation topping out?

Thanks!

#2

One of the benefits of the experience living in emerging economies is that one can eyewitness all the stages of economic cycles.

I visualise it from the labor market standpoint and labor costs.

Initial recovery. Lots of jobless, everybody is hungry, people are ready to work for pennies, just to get any job before anybody else. They dump labor costs. Inflation decelerating.

Slowdown is still a growth above the trend line. Even though economists see the slowdown in their metrics - people see prosperity around, and are very confident that they cracked the code and their labour is extremely valuable. Inflation is rising.

Contraction. People still got savings and illisuions of their uniqueness. Before they realized the reality, wage inflation topps out.

#3

Thanks @Alexander_Prokopenko , that makes sense

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