Chapter 8 - Inflation Flashcards
In a perfectly anticipated inflation, does inflation have real costs
No
What two exceptions are to inflation having no costs?
holding currency costs and menu costs
Cost to an individual of ___________ is the interest forgone by not holding an interest-bearing asset
holding currency
Arise from the fact that with inflation, ppl have to devote real resources to marking up prices and changing other things
menu costs
How are costs when there is low to moderate inflation rates
costs of fully anticipates inflation are small
True or False: one important effect of inflation is a change in the real value of assets fixed in nominal terms
True
What implies lower nominal interest rates on assets, which can possibly be negative
Realized real interest rates
What earns a negative real return whenever inflation is positive
Currency
True or False: Gains and losses from the redistributions of wealth among sectors and individuals that take place as a result of unanticipated inflation basically cancel out over the economy as a whole
True
True or False: When the government losses from inflation, the private sectors pays lower taxes
False, when the government gains, not losses
True or False: when the corporate sector gains from inflation, owners of corporations benefit a the expense of others.
True
True or False: inflation redistributes income and wealth between debtors and creditors.
True
In unanticipated inflation, what rises faster than wages and therefore allows profits to expand?
Prices
Evidence that the real return on common stocks is reduced by what? Thus causing equity holders to hurt.
unanticipated inflation
True or False: A failure to index the tax structure implies that inflation moves the public into higher tax bracets and thus raises the real value of its tax payments or reduces real disposable income.
True
