Inflation Creates Winners and Losers

Inflation Creates Winners and Losers - Econ 4.3 Friday...

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Econ 4.3 Friday, February 19, 1999 Announcements: Homework Assignment #3 is posted on the webpage and is due on Wednesday. The Chapter 8 and 9 quizzes will be online soon. The next exam will be Friday, February 26th. Voluntary Pre-Exam Review Session , Thursday, February 25, in 110 Wartik; 6:30 - 8:25 PM. Lecture notes: Inflation Creates Winners and Losers The effect of inflation on individuals depends on how prices of items each buys or sells changes Inflation redistributes income and wealth Redistributive Effects of Inflation Price Effects: Prefer goods and sevices whose prices rise least get larger share of real income Income Effects: If nominal income rises less than inflation rate, get smaller share of real income Wealth Effects: If real value of assets rises, become better off "Tax Effects": like a tax, transfer income and wealth from one group to another Other Effects of Inflation Social Tension: Between labor and management, government and people, among consumers Despair:
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