文档介绍：CHAPTER 08
INFLATION, DISINFLATION, AND DEFLATION
Slide 1
What You Will Learn in this Chapter:
Why efforts to collect an inflation tax by printing money can lead to high rates of inflation
How high inflation can spiral into hyperinflation as the public tries to avoid paying the inflation tax
The economy-wide costs of inflation and disinflation, and the debate over the optimal rate of inflation
Why even moderate levels of inflation can be hard to end
Why deflation is a problem for economic policy
2
Money and Inflation
Between 1985 and 1995 Brazil demonstrated what really serious inflation — up to almost 3,000% per year — looks like.
3
Money and Prices
According to the classical model of the price level, the real quantity of money is always at its long-run equilibrium level.
4
Money Supply Growth and Inflation in Brazil
5
The Inflation Tax
The inflation tax is the reduction in the real value of money held by the public caused by inflation, equal to the inflation rate times the money supply, on those who hold money
The real value of resources captured by the government is reflected by the real inflation tax, the inflation rate times the real money supply
6
The Logic of Hyperinflation
To avoid paying the inflation tax, people reduce their real money holdings and force the government to increase inflation to capture the same amount of real inflation tax
In some cases, this leads to a vicious circle of a shrinking real money supply and a rising rate of inflation, leading to hyperinflation and a fiscal crisis
In 1923, Germany’s money was worth so little that children used stacks of banknotes as building blocks
7
Money and Prices in Brazil, 1985-1995
8
Effects of Inflation Winners and Losers from Unexpected Inflation
The nominal interest rate is equal to the real interest rate plus the inflation rate
The expected inflation rate is accounted for in the nominal interest rate on a loan
Inflation that is higher than expected benefits borrowers and hurts