Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 10 Money and Prices in the Long Run
Chapter 30 of 36 Money Growth and Inflation
Section 25 of 28
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· shoe leather costs
· menu costs
· inflation-induced tax distortions
· confusion and inconvenience
· arbitrary redistribution of wealth
All create relative price variability and the misallocation of resources.
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Confusion and Inconvenience
If we yearly changed how many inches were in a yard, it would cause confusion and inconvenience.
Money is the economy's unit of account and is what we use to quote prices, record debts, and measure all transactions.
When the Federal Reserve increases the money supply and creates inflation
it decreases the real value of the unit of account.
This causes substantial costs due to the resulting confusion and inconvenience.
The tax code incorrectly measures real incomes because of inflation.
Similarly, accountants incorrectly measure firms' earnings when prices are rising.
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Because inflation causes dollars over time to have different real values computing a firm's profit, the difference between its revenue and costs
is more complicated when there is inflation.
Inflation makes investors around the world less able to sort successful and unsuccessful firms.
This impedes financial markets from optimally allocating the economy's savings to investments.
Inability to assess the true value of resources makes efficient use of them difficult.
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confusion and inconvenience
konran to fuben
混乱と不便
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