CHAPTER 30曼昆经济学.docx
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CHAPTER30曼昆经济学
CHAPTER30MONEYGROWTHANDINFLATION
LEARNINGOBJECTIVES:
Øwhyinflationresultsfromrapidgrowthinthemoneysupply.
Øthemeaningoftheclassicaldichotomyandmonetaryneutrality.
Øwhysomecountriesprintsomuchmoneythattheyexperiencehyperinflation.
Øhowthenominalinterestraterespondstotheinflationrate.
Øthevariouscoststhatinflationimposesonsociety.
KEYPOINTS:
1.Theoveralllevelofpricesinaneconomyadjuststobringmoneysupplyandmoneydemandintobalance.Whenthecentralbankincreasesthesupplyofmoney,itcausesthepriceleveltorise.Persistentgrowthinthequantityofmoneysuppliedleadstocontinuinginflation.
2.Theprincipleofmonetaryneutralityassertsthatchangesinthequantityofmoneyinfluencenominalvariablesbutnotrealvariables.Mosteconomistsbelievethatmonetaryneutralityapproximatelydescribesthebehavioroftheeconomyinthelongrun.
3.Agovernmentcanpayforsomeofitsspendingsimplybyprintingmoney.Whencountriesrelyheavilyonthis“inflationtax,”theresultishyperinflation.
4.OneapplicationoftheprincipleofmonetaryneutralityistheFishereffect.AccordingtotheFishereffect,whentheinflationraterises,thenominalinterestraterisesbythesameamount,sothattherealinterestrateremainsthesame.
5.Manypeoplethinkthatinflationmakesthempoorerbecauseitraisesthecostofwhattheybuy.Thisviewisafallacy,however,becauseinflationalsoraisesnominalincomes.
6.Economistshaveidentifiedsixcostsofinflation:
shoeleathercostsassociatedwithreducedmoneyholdings,menucostsassociatedwithmorefrequentadjustmentofprices,increasedvariabilityofrelativeprices,unintendedchangesintaxliabilitiesduetononindexationofthetaxcode,confusionandinconvenienceresultingfromachangingunitofaccount,andarbitraryredistributionsofwealthbetweendebtorsandcreditors.Manyofthesecostsarelargeduringhyperinflation,butthesizeofthesecostsformoderateinflationislessclear.
OUTLINE:
I.TheinflationrateismeasuredasthepercentagechangeintheCPI,theGDPdeflator,orsomeotherindexoftheoverallpricelevel.
II.TheClassicalTheoryofInflation
Note:
makesurethatyourealizethatinflationmeansthattheaveragelevelofpricesintheeconomyisrisingratherthanthepricesofallgoods.
A.TheLevelofPricesandtheValueofMoney
1.Whenthepricelevelrises,peoplehavetopaymoreforthegoodsandservicesthattheypurchase.
2.Ariseinthepricelevelalsomeansthatthevalueofmoneyisnowlowerbecauseeachdollarnowbuysasmallerquantityofgoodsandservices.
3.IfPisthepricelevel,thenthequantityofgoodsandservicesthatcanbepurchasedwith$1isequalto1/P.
B.MoneySupply,MoneyDemandandMonetaryEquilibrium
1.Thevalueofmoneyisdeterminedbythesupplyanddemandformoney.
2.Forthemostpart,thesupplyofmoneyisdeterminedbytheFed.
a.Thisimpliesthatthequantityofmoneysuppliedisfixed(untiltheFeddecidestochangeit).
b.Thus,thesupplyofmoneywillbevertical(perfectlyinelastic).
3.Therearemanydeterminantsofthedemandformoney.
a.Onevariablethatisveryimportantindeterminingthedemandformoneyisthepricelevel.
b.Thehigherpricesare,themoremoneythatisneededtoperformtransactions.
c.Thus,ahigherpricelevel(andalowervalueofmoney)leadstoahigherquantityofmoneydemanded.
1
Figure1
4.Inthelongrun,theoverallpriceleveladjuststothelevelatwhichthedemandformoneyandthesupplyofmoneyareequal.
a.Ifthepricelevelisabovetheequilibriumlevel,peoplewillwanttoholdmoremoneythanisavailableandpriceswillhavetodecline.
b.Ifthepricelevelisbelowequilibrium,peoplewillwanttoholdlessmoneythanthatavailableandthepricelevelwillrise.
5.Wecanshowthesupplyanddemandformoneyusingagraph.
a.Theleft-handverticalaxisisthevalueofmoney,measuredby1/P.
b.Theright-handverticalaxisisthepricelevel(P).Notethatitisinverted―ahighvalueofmoneymeansalowpricelevelandviceversa.
c.Attheequilibrium,thequantityofmoneydemandedisequaltothequantityofmoneysupplied.
C.TheEffectsofaMonetaryInjection
1.AssumethattheeconomyiscurrentlyinequilibriumandtheFedsuddenlyincreasesthesupplyofmoney.
2.Thesupplyofmoneyshiftstotheright.
Figure2
3.Theequilibriumvalueofmoneyfallsandthepricelevelrises.
4.Whenanincreaseinthemoneysupplymakesdollarsmoreplentiful,theresultisanincreaseinthepricelevelthatmakeseachdollarlessvaluable.
5.Definitionofquantitytheoryofmoney:
atheoryassertingthatthequantityofmoneyavailabledeterminesthepricelevelandthatthegrowthrateinthequantityofmoneyavailabledeterminestheinflationrate.
D.ABriefLookattheAdjustmentProcess
1.Theimmediateeffectofanincreaseinthemoneysupplyistocreateanexcesssupplyofmoney.
2.Peopletrytogetridofthisexcesssupplyinavarietyofways.
a.Theymaybuygoodsandserviceswiththefunds.
b.Theymayusetheseexcessfundstomakeloanstoothers.Theseloansarethenlikelyusedtobuygoodsandservices.
c.Ineithercase,theincreaseinthemoneysupplyleadstoanincreaseinthedemandforgoodsandservices.
d.Becausethesupplyofgoodsandserviceshasnotchanged,theresultofanincreaseinthedemandforgoodsandserviceswillbehigherprices.
E.TheClassicalDichotomyandMonetaryNeutrality
1.Inthe18thcentury,DavidHumeandothereconomistswroteabouttherelationshipbetweenmonetarychangesandimportantmacroeconomicvariablessuchasproduction,employment,realwages,andrealinterestrates.
2.Theysuggestedthateconomicvariablesshouldbedividedintotwogroups:
nominalvariablesandrealvariables.
a.Definitionofnominalvariables:
variablesmeasuredinmonetaryunits.
b.Definitionofrealvariables:
variablesmeasuredinphysicalunits.
3.Definitionofclassicaldichotomy:
thetheoreticalseparationofnominalandrealvariables.
4.Pricesintheeconomyarenominal,butrelativepricesarereal.
5.Humesuggestedthatdifferentforcesinfluencerealandnominalvariables.
6.AccordingtoHume,changesinthemoneysupplyaffectnominalvariablesbutnotrealvariables.
7.Definitionofmonetaryneutrality:
thepropositionthatchangesinthemoneysupplydonotaffectrealvariables.
F.VelocityandtheQuantityEquation
1.Definitionofvelocityofmoney:
therateatwhichmoneychangeshands.
2.Tocalculatevelocity,wedividenominalGDPbythequantityofmoney.
3.IfPisthepricelevel(theGDPdeflator),YisrealGDP,andMisthequantityofmoney:
4.Rearranging,wegetthequantityequation.
5.Definitionofquantityequation:
theequationM×V=P×Y,whichrelatesthequantityofmoney,thevelocityofmoney,andthedollarvalueoftheeconomy’soutputofgoodsandservices.
a.Thequantityequationshowsthatanincreaseinthequantityofmoneymustbereflectedinoneoftheotherthreevariables.
b.Specifically,thepricelevelmustrise,outputmustrise,orvelocitymustfall.
Figure3
Figure3
c.Figure3showsnominalGDP,thequantityofmoney(asmeasuredbyM2)andthevelocityofmoneyfortheUnitedStatessince1960.Itappearsthatvelocityisfairlystable,whileGDPandthemoneysupplyhavegrowndramatically.
6.Wecannowexplainhowanincreaseinthequantityofmoneyaffectsthepricelevelusingthequantityequation.
a.Thevelocityofmoneyisrelativelystableovertime.
b.Whenthecentralbankchangesthequantityofmoney(M),itwillproportionatelychangethenominalvalueofoutput(P×Y).
c.Theeconomy’soutputofgoodsandservices(Y)isdeterminedprimarilybyavailableresourcesandtechnology.Becausemoneyisneutral,changesinthemoneysupplydonotaffectoutput.
d.ThismustmeanthatPincreasesproportionatelywiththechangeinM.
G.TheInflationTax
1.Somecountriesusemoneycreationtopayforspendinginsteadofusingtaxrevenue.
2.Definitionofinflationtax:
therevenuethegovernmentraisesbycreatingmoney.
3.Theinflationtaxisataxoneveryonewhoholdsmoney.
4.Almostallhyperinflationsfollowthesamepattern.
a.Thegovernmenthasahighlevelofspendingandinadequatetaxrevenuetopayforitsspending.
b.Thegovernment’sabilitytoborrowfundsislimited.
c.Asaresult,itturnstoprintingmoneytopayforitsspending.
d.Thelargeincreasesinthemoneysupplyleadtolargeamountsofinflation.
e.Thehyperinflationendswhenthegovernmentcutsitsspendingandeliminatestheneedtocreatenewmoney.
H.TheFisherEffect
1.Recallthattherealinterestrateisequaltothenominalinterestrateminustheinflationrate.
2.This,ofcourse,meansthat:
a.Thesupplyanddemandforloanablefundsdeterminestherealinterestrate.
b.Growthinthemoneysupplydeterminestheinflationrate.
3.WhentheFedincreasestherateofgrowthofthemoneysupply,theinflationrateincreases.Thisinturnwillleadtoanincreaseinthenominalinterestrate.
4.DefinitionofFishereffect:
theone-for-oneadjustmentofthenominalinterestratetotheinflationrate.
a.TheFishereffectdoesnotholdintheshortruntotheextentthatinflationisunanticipated.
b.Ifinflationcatchesborrowersandlendersbysurprise,thenominalinterestratetheysetwillfailtoreflecttheriseinprices.
Figure5
Figure5
5.Figure5showsthenominalinterestrateandtheinflationrateintheU.S.economysince1960.
III.TheCostsofInflation
A.AFallinPurchasingPower?
TheInflationFallacy
1.Mostindiv
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