经济学原理Chapter28.docx
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经济学原理Chapter28.docx
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经济学原理Chapter28
QuickQuizzes
1.Whenthegovernmentofacountryincreasesthegrowthrateofthemoneysupplyfrom5percentperyearto50percentperyear,pricesandnominalinterestrateswillincreasedramatically.Thegovernmentmaybeincreasingthemoneysupplytofinanceitsexpenditures.
2.Sixcostsofinflationare:
(1)shoeleathercosts;
(2)menucosts;(3)relative-pricevariabilityandthemisallocationofresources;(4)inflation-inducedtaxdistortions;(5)confusionandinconvenience;and(6)arbitraryredistributionsofwealth.Shoeleathercostsarisebecauseinflationcausespeopletospendresourcesgoingtothebankmoreoften.Menucostsoccurwhenpeoplespendresourceschangingtheirpostedprices.Relative-pricevariabilityoccursbecauseasgeneralpricesrise,afixeddollarpricetranslatesintoadecliningrelativeprice,sotherelativepricesofgoodsareconstantlychangingasaresultofinflation;thiscausesamisallocationofresources.Thecombinationofinflationandtaxationcausesdistortionsbecausepeoplearetaxedontheirnominalcapitalgainsandinterestincome,insteadoftheirrealincome.Inflationcausesconfusionandinconveniencebecauseitreducesmoney’sabilitytofunctionasaunitofaccount.Unexpectedinflationredistributeswealthbetweenborrowersandlenders.
QuestionsforReview
1.Anincreaseinthepricelevelreducesthevalueofmoneybecauseeachdollarinyourwalletnowbuysasmallerquantityofgoodsandservices.
2.Accordingtothequantitytheoryofmoney,anincreaseinthequantityofmoneycausesanincreaseinthepricelevel.
3.Nominalvariablesarethosemeasuredinmonetaryunits,whilerealvariablesarethosemeasuredinphysicalunits.Examplesofnominalvariablesincludethepricesofgoods,wages,andthedollarvalueofGDP.Examplesofrealvariablesincluderelativeprices(thepriceofonegoodintermsofanother),realwages,andrealGDP.Accordingtotheprincipleofmonetaryneutrality,onlynominalvariablesareaffectedbychangesinthequantityofmoney.
4.Inflationislikeataxbecauseeveryonewhoholdsmoneylosespurchasingpower.Inahyperinflation,thegovernmentincreasesthemoneysupplyrapidly,whichleadstoahighrateofinflation.Thusthegovernmentusestheinflationtax,insteadoftaxesonincome,tofinanceitsspending.
5.AccordingtotheFishereffect,anincreaseintheinflationrateraisesthenominalinterestratebythesameamountthattheinflationrateincreases,withnoeffectontherealinterestrate.
6.Thecostsofinflationincludeshoeleathercostsassociatedwithreducedmoneyholdings,menucostsassociatedwithmorefrequentadjustmentofprices,increasedvariabilityofrelativeprices,unintendedchangesintaxliabilitiesduetonon-indexationofthetaxcode,confusionandinconvenienceresultingfromachangingunitofaccount,andarbitraryredistributionsofwealthbetweendebtorsandcreditors.WithalowandstablerateofinflationlikethatintheUnitedStates,noneofthesecostsareveryhigh.Perhapsthemostimportantoneistheinteractionbetweeninflationandthetaxcode,whichmayreducesavingandinvestmenteventhoughtheinflationrateislow.
7.Ifinflationislessthanexpected,creditorsbenefitanddebtorslose.Creditorsreceivedollarpaymentsfromdebtorsthathaveahigherrealvaluethanwasexpected.
P
roblemsandApplications
1.Inthisproblem,allamountsareshowninbillions.
a.NominalGDP=PxY=$10,000andY=realGDP=$5,000,soP=(PxY)/Y=$10,000/$5,000=2.
SinceMxV=PxY,thenV=(PxY)/M=$10,000/$500=20.
b.IfMandVareunchangedandYrisesby5percent,thensinceMxV=PxY,Pmustfallby5percent.Asaresult,nominalGDPisunchanged.
c.Tokeepthepricelevelstable,theFedmustincreasethemoneysupply5percent,matchingtheincreaseinrealGDP.Then,sincevelocityisunchanged,thepricelevelwillbestable.
d.IftheFedwantsinflationtobe10percent,itwillneedtoincreasethemoneysupply15percent.ThusMxVwillrise15percent,causingPxYtorise15percent,witha10percentincreaseinpricesanda5percentriseinrealGDP.
2.a.Ifpeopleneedtoholdlesscash,thedemandformoneyshiftstotheleft,sincetherewillbelessmoneydemandedatanypricelevel.
b.IftheFeddoesn’trespondtothisevent,theshifttotheleftofthedemandformoneycombinedwithnochangeinthesupplyofmoneyleadstoadeclineinthevalueofmoney(1/P),whichmeansthepricelevelrises,asshowninFigure28-1.
Figure28-1
c.IftheFedwantstokeepthepricelevelstable,itshouldreducethemoneysupplyfromS1toS2inFigure28-2.Thiswouldcausethesupplyofmoneytoshifttotheleftbythesameamountthatthedemandformoneyshifted,resultinginnochangeinthevalueofmoneyandthepricelevel.
Figure28-2
3.Withconstantvelocity,reducingtheinflationratetozerowouldrequirethemoneygrowthratetoequalthegrowthrateofoutput,notzero,accordingtothequantitytheoryofmoney(MxV=PxY).
4.Leninisrightthatgovernmentscanconfiscatethewealthofcitizenswithinflation.Inflationactslikeataxonpeoplewhoholdmoney,byreducingitsvalue.Thegovernmentcanfinanceitsexpendituresbyprintingmoneyandusingittobuythings,whichresultsinahighermoneysupplyandinflation.Theresultisatransferofwealthfrommoney-holderstothegovernment.
5.Ifacountry'sinflationrateincreasessharply,theinflationtaxonholdersofmoneyincreasessignificantly.Wealthinsavingsaccountsisn'tsubjecttoachangeintheinflationtaxbecausethenominalinterestratewillincreasewiththeriseininflation.Butholdersofsavingsaccountsarehurtbytheincreaseintheinflationratebecausetheyaretaxedontheirnominalinterestincome,sotheirrealreturnsarelower.
6.Hyperinflationsusuallyarisewhengovernmentstrytofinancemuchoftheirexpendituresbyprintingmoney.Thisisunlikelytooccurifthecentralbankisindependent77ofthegovernment.
7.a.Whenthepriceofbothgoodsdoublesinayear,inflationis100percent.Thetotalcostofpurchasingequalamountsofbeansandriceequalsthequantityofeachgoodtimesitsprice,addedtogetherforallgoods.Thatis,ifxisthequantityofbeans,whichalsoequalsthequantityofrice,thenthecostofbeansandricefortheyearisx(PB+PR).Inthesecondyear,thecostisx(PB'+PR'),wherethe'markreferstothepriceinthesecondyear.Thenwecandefineapriceindexwithavalueofoneinthefirstyear.Inthesecondyear,thepriceindexhasthevalueofthecostofgoodsinthesecondyeardividedbythecostofgoodsinthefirstyear.Thusthepriceindexinthesecondyearisx(PB'+PR')/x(PB+PR)=(PB'+PR')/(PB+PR)=($2+$6)/($1+$3)=$8/$4=2.Theinflationrateisthen(2-1)/1x100%=100%.Sincethepricesofallgoodsriseby100percent,thefarmersgeta100percentincreaseintheirincomestogoalongwiththe100percentincreaseinprices,soneitherisaffectedbythechangeinprices.
b.Ifthepriceofbeansrisesto$2andthepriceofricerisesto$4,thenthepriceindexinthesecondyearis(PB'+PR')/(PB+PR)=($2+$4)/($1+$3)=$6/$4=1.5,sotheinflationrateis(1.5-1)/1x100%=50%.Bobisbetteroffbecausehisdollarrevenuesdoubled(increased100%)whileinflationwasonly50%.Ritaisworseoffbecauseinflationwas50%,sothepricesofthegoodsshebuysrosefasterthanthepriceofthegoods(rice)shesells,whichroseonly33%.
c.Ifthepriceofbeansrisesto$2andthepriceofricefallsto$1.50,thenthepriceindexinthesecondyearis(PB'+PR')/(PB+PR)=($2+$1.50)/($1+$3)=$3.50/$4=0.875,sotheinflationrateis(0.875-1)/1x100%=-12.5%.Bobisbetteroffbecausehisdollarrevenuesdoubled(increased100%)whilepricesoverallfell12.5%.Ritaisworseoffbecauseinflationwas-12.5%,sothepricesofthegoodsshebuysdidn'tfallasfastasthepriceofthegoods(rice)shesells,whichfell50%.
d.TherelativepriceofriceandbeansmattersmoretoBobandRitathantheoverallinflationrate.Ifthepriceofthegoodthatapersonproducesrisesmorethaninflation,heorshewillbebetteroff.Ifthepriceofthegoodapersonproducesriseslessthaninflation,heorshewillbeworseoff.
8.Thefollowingtableshowstherelevantcalculations:
(a)
(b)
(c)
(1)Nominalinterestrate
10.0
6.0
4.0
(2)Inflationrate
5.0
2.0
1.0
(3)Before-taxrealinterestrate
5.0
4.0
3.0
(4)Reducedinterestratedueto40%tax
4.0
2.4
1.6
(5)After-taxnominalinterestrate
6.0
3.6
2.4
(6)After-taxrealinterestrate
1.0
1.6
1.4
Row(3)isrow
(1)minusrow
(2).Row(4)is.40xrow
(1).Row(5)is(1-.40)xrow
(1),whichequalsrow
(1)minusrow(4).Row(6)isrow(5)minusrow
(2).Notethateventhoughpart(a)hasthehighestbefore-taxrealinterestrate,ithasthelowestafter-taxrealinterestrate.Notealsothattheafter-taxrealinterestrateismuchlessthanthebefore-taxrealinterestrate.
9.Theshoeleathercostsofgoingtothebankincludethevalueofyourtime,gasforyourcarthat'susedasyoudrivetothebank,andtheinconvenienceofnothavingmoremoneyonhand.Thesecostscouldbemeasuredbyvaluingyourtimeatyourwagerateandvaluingthegasforyourcaratitscost.Valuingtheinconvenienceofbeingshortofcashishardertomeasure,butmightdependonthevalueoftheshoppingopportunitiesyougiveupbynothavingenoughmoneytobuythingsyouwant.Yourcollegepresidentdiffersfromyoumainlyinhavingahigherwage,thushavingahighercostoftime.
10.Thefunctionsofmoneyaretoserveasa
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