stant, does this zero-inflation goal require that the rate of money growth equal zero? If yes, explain why. If no, explain what the rate of money growth should equal. 4. The economist John Maynard Keynes wrote in The Economic Consequences of the Peace (1919): "Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can con- fiscate, secretly and unobserved, an important part of the wealth of their citizens." Justify Lenin's assertion. 5. Suppose that a country's inflation rate increases sharply.. What happens to the inflation tax on the holders of money? Why is wealth that is held in savings accounts not subject to a change in the inflation tax? Can think of any way in which holders of savings accounts are hurt by the increase in the inflation rate? you 12 6. Hyperinflations are extremely rare in countries whose central banks are independent of the rest of the ernment. Why might this be so? 7. Let's consider the effects of inflation in an economy gov- 13. comprising only two people: Bob, a bean farmer, and Rita, a rice farmer. Bob and Rita both always consume equal amounts of rice and beans. In year 2015, the price of beans was $1, and the price of rice was $3. a. Suppose that in 2016 the price of beans was $2
stant, does this zero-inflation goal require that the rate of money growth equal zero? If yes, explain why. If no, explain what the rate of money growth should equal. 4. The economist John Maynard Keynes wrote in The Economic Consequences of the Peace (1919): "Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can con- fiscate, secretly and unobserved, an important part of the wealth of their citizens." Justify Lenin's assertion. 5. Suppose that a country's inflation rate increases sharply.. What happens to the inflation tax on the holders of money? Why is wealth that is held in savings accounts not subject to a change in the inflation tax? Can think of any way in which holders of savings accounts are hurt by the increase in the inflation rate? you 12 6. Hyperinflations are extremely rare in countries whose central banks are independent of the rest of the ernment. Why might this be so? 7. Let's consider the effects of inflation in an economy gov- 13. comprising only two people: Bob, a bean farmer, and Rita, a rice farmer. Bob and Rita both always consume equal amounts of rice and beans. In year 2015, the price of beans was $1, and the price of rice was $3. a. Suppose that in 2016 the price of beans was $2
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:stant, does this zero-inflation goal require that the rate
of money growth equal zero? If yes, explain why. If no,
explain what the rate of money growth should equal.
4. The economist John Maynard Keynes wrote in The
Economic Consequences of the Peace (1919): "Lenin is
said to have declared that the best way to destroy the
capitalist system was to debauch the currency. By a
continuing process of inflation, governments can con-
fiscate, secretly and unobserved, an important part of
the wealth of their citizens." Justify Lenin's assertion.
5. Suppose that a country's inflation rate increases sharply..
What happens to the inflation tax on the holders of
money? Why is wealth that is held in savings accounts
not subject to a change in the inflation tax? Can
think of any way in which holders of savings accounts
are hurt by the increase in the inflation rate?
you
12
6. Hyperinflations are extremely rare in countries whose
central banks are independent of the rest of the
ernment. Why might this be so?
7. Let's consider the effects of inflation in an economy
gov-
13.
comprising only two people: Bob, a bean farmer, and
Rita, a rice farmer. Bob and Rita both always consume
equal amounts of rice and beans. In year 2015, the
price of beans was $1, and the price of rice was $3.
a. Suppose that in 2016 the price of beans was $2
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