Questions

Define: Inflation as a tax. Who benefits from inflation?

Define: Shoeleather costs and menu costs. What are the other costs to expected inflation discussed in class today? How would you rank them in terms of importance?

Some economic historians have noted that during the period of the gold standard, gold discoveries were most likely to occur after a long deflation. (The discoveries of 1896 are an example.) Why might this be true?

Why would an increase in the price of oil not in itself cause general prices to rise?

Inflation redistributes incomes and wealth. How does this affect people on fixed incomes? Holders of real asets? Of money assets? How do COLAs, union wage contracts, and adjustable rate loans counter the effects of inflation?

Define hyperinflation. Why do governments resort to it? How are the costs of inflation magnified by a hyperinflation? (Hyperinflation articles: here and here. Also, here is Zimbabwe's central bank.)

What is dollarization, and how does this affect the inflation rate in (i) countries that dollarize and (ii) the U.S.?

What three strategies do governments often employ to counter the effects of their inflationary policies?

The Housing bubble: