What are the factors that will determine the optimal inflation rate?
What will be an ideal response?
In short, the factors that will determine the optimal inflation rate are the relative magnitudes of the costs and benefits of inflation. Therefore, on the cost side, individuals would consider: shoe-leather costs, tax distortions, money illusion, and inflation variability. On the benefit side, one would consider: seignorage, the option of a negative real interest rate, and money illusion. So, an individual would compare the costs and benefits of inflation and choose some optimal inflation rate.
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In an economy without international trade, investment must equal ________ saving.
A. national B. public C. private D. life-cycle
Most towns were initially established at locations with
(a) an excellent harbor and river stretching into the hinterland. (b) an excellent harbor and flat land so roads could be easily built into the hinterlands. (c) in mountainous areas which provided better protection against Indians. (d) extensive forests to provide fuel and lumber.
If the reserve requirement was 5% and a bank customer makes a deposit of $1,000, the initial result would be:
a. a $950 increase in required reserves and a $50 increase in excess reserves. b. a $20,000 increase in required reserves and a $950 increase in excess reserves. c. a $50 increase in required reserves and a $20,000 increase in excess reserves. d. none of the above
Production location is not an important choice when doing business in the European Union.
a. true b. false