LectureInflation

LectureInflation - Money and Inflation Ariel Singerman...

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Unformatted text preview: Money and Inflation Ariel Singerman February 4, 2008 Ariel Singerman () Money and Inflation February 4, 2008 1 / 11 Introduction Definition The inflation rate is the percentage change in the price level from one period to the next. So, inflation can be viewed as the overall increase in the level of prices. In this chapter we examine the classical theory of causes, effects and social costs of inflation. This theory is classical in the sense that it assumes that prices are flexible enough to adjust for changes in Supply and Demand. Such an assumption is not a bad one in the LR. (but, in the SR prices tend to be more sticky) Ariel Singerman () Money and Inflation February 4, 2008 2 / 11 What is money? A price is the rate at which money is exchanged for a good or service. So, in order to go on we need a definition of money. Definition Money is the stock of assets that can be readily used to make transactions Money has 3 functions: 1 Store of value: is a way to transfer purchasing power from the present to the future 2 Unit of account: provides the terms in which prices are quoted and debts recorded (it is used to measure economic transactions) 3 Medium of exchange: is what we use to buy goods and services. the ease with which moeny os converted into other things is called liquidity Ariel Singerman () Money and Inflation February 4, 2008 3 / 11 Types of money...
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LectureInflation - Money and Inflation Ariel Singerman...

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