inflation concepts

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Author:
Anonymous
ID:
3046
Filename:
inflation concepts
Updated:
2009-12-14 00:25:47
Tags:
macro
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Description:
concepts
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  1. 6 costs of inflation
    1. shoeleather cost 2.menu cost 3. relative price variable & misallocation of resources 4. inflation induced tax distortions 5.confusion and inconvinience 6. arbitrary redistribution of wealth ( the borrower wins in an infaltion and the lender loses)
  2. tax burden on saving
    • real interest rate + inflation=nominal interest rate
    • reduced interest due to 25% tax (.25*nominal interest rate)
    • after tax nominal interest rate (.75*nominal interest rate)
    • after tax real interest rate (after tax nominal rate-inflation rate)
  3. quantity equation
    • m*v=p*y
    • v=(p*y)/m

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