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1、会计学1曼昆经济学原理曼昆经济学原理money inflationLEARNING OBJECTIVES n n why inflation results from rapid growth in the money supply.n n the meaning of the classical dichotomy and monetary neutrality.n n why some countries print so much money that they experience hyperinflation.n n how the nominal interest rate res
2、ponds to the inflation rate.n n the various costs that inflation imposes on society.第1页/共46页The Meaning of Moneyn nMoney is the set of assets in an economy that people regularly use to buy goods and services from other people.第2页/共46页THE CLASSICAL THEORY OF INFLATIONn nInflation is an increase in th
3、e overall level of prices.n nHyperinflation is an extraordinarily high rate of inflation.第3页/共46页THE CLASSICAL THEORY OF INFLATIONn nInflation:Historical Aspectsn nOver the past 60 years,prices have risen on average Over the past 60 years,prices have risen on average about 5 percent per year.about 5
4、 percent per year.n nDeflation,meaning decreasing average prices,Deflation,meaning decreasing average prices,occurred in the U.S.in the nineteenth century.occurred in the U.S.in the nineteenth century.n nHyperinflation refers to high rates of inflation such Hyperinflation refers to high rates of inf
5、lation such as Germany experienced in the 1920s.as Germany experienced in the 1920s.第4页/共46页THE CLASSICAL THEORY OF INFLATIONn nInflation:Historical Aspectsn nIn the 1970s prices rose by 7 percent per year.In the 1970s prices rose by 7 percent per year.n nDuring the 1990s,prices rose at an average r
6、ate of 2 During the 1990s,prices rose at an average rate of 2 percent per year.percent per year.第5页/共46页THE CLASSICAL THEORY OF INFLATIONn nThe quantity theory of money is used to explain the long-run determinants of the price level and the inflation rate.n nInflation is an economy-wide phenomenon t
7、hat concerns the value of the economys medium of exchange.n nWhen the overall price level rises,the value of money falls.第6页/共46页Money Supply,Money Demand,and Monetary EquilibriumMoney Supply,Money Demand,and Monetary Equilibriumn nThe money supply is a policy variable that is controlled by the Fed.
8、n nThrough instruments such as open-market Through instruments such as open-market operations,the Fed directly controls the quantity of operations,the Fed directly controls the quantity of money supplied.money supplied.第7页/共46页Money Supply,Money Demand,and Monetary EquilibriumMoney Supply,Money Dema
9、nd,and Monetary Equilibriumn nMoney demand has several determinants,including interest rates and the average level of prices in the economy.第8页/共46页Money Supply,Money Demand,and Monetary EquilibriumMoney Supply,Money Demand,and Monetary Equilibriumn nPeople hold money because it is the medium of exc
10、hange.n nThe amount of money people choose to hold The amount of money people choose to hold depends on the prices of goods and services.depends on the prices of goods and services.第9页/共46页Money Supply,Money Demand,and Monetary EquilibriumMoney Supply,Money Demand,and Monetary Equilibriumn nIn the l
11、ong run,the overall level of prices adjusts to the level at which the demand for money equals the supply.第10页/共46页Figure 1 Money Supply,Money Demand,and the Figure 1 Money Supply,Money Demand,and the Equilibrium Price LevelEquilibrium Price LevelCopyright 2004 South-WesternQuantity ofMoneyValue ofMo
12、ney,1/PPrice Level,PQuantity fixedby the FedMoney supply01(Low)(High)(High)(Low)1/21/43/411.3324Equilibriumvalue ofmoneyEquilibriumprice levelMoneydemandA第11页/共46页Figure 2 The Effects of Monetary InjectionFigure 2 The Effects of Monetary InjectionCopyright 2004 South-WesternQuantity ofMoneyValue ofM
13、oney,1/PPrice Level,PMoneydemand01(Low)(High)(High)(Low)1/21/43/411.3324M1MS1M2MS22.decreasesthe value ofmoney.3.andincreasesthe pricelevel.1.An increasein the moneysupply.AB第12页/共46页THE CLASSICAL THEORY OF INFLATIONn nThe Quantity Theory of Moneyn nHow the price level is determined and why it might
14、 How the price level is determined and why it might change over time is called the quantity theory of change over time is called the quantity theory of money.money.n nThe quantity of money available in the economy The quantity of money available in the economy determines the value of money.determine
15、s the value of money.n nThe primary cause of inflation is the growth in the The primary cause of inflation is the growth in the quantity of moneyquantity of money.第13页/共46页The Classical Dichotomy and Monetary NeutralityThe Classical Dichotomy and Monetary Neutralityn nNominal variables are variables
16、 measured in monetary units.n nReal variables are variables measured in physical units.第14页/共46页The Classical Dichotomy and Monetary NeutralityThe Classical Dichotomy and Monetary Neutralityn nAccording to Hume and others,real economic variables do not change with changes in the money supply.n nAcco
17、rding to the According to the classical dichotomyclassical dichotomy,different forces,different forces influence real and nominal variables.influence real and nominal variables.n nChanges in the money supply affect nominal variables but not real variables.第15页/共46页The Classical Dichotomy and Monetar
18、y NeutralityThe Classical Dichotomy and Monetary Neutralityn nThe irrelevance of monetary changes for real variables is called monetary neutrality.第16页/共46页Velocity and the Quantity EquationVelocity and the Quantity Equationn nThe velocity of money refers to the speed at which the typical dollar bil
19、l travels around the economy from wallet to wallet.第17页/共46页Velocity and the Quantity EquationVelocity and the Quantity EquationV=(P Y)/Mn nWhere:Where:VV =velocity =velocityP P =the price level=the price levelY Y =the quantity of output =the quantity of outputMM=the quantity of money=the quantity o
20、f money第18页/共46页Velocity and the Quantity EquationVelocity and the Quantity Equationn nRewriting the equation gives the quantity equation:M V=P Y第19页/共46页Velocity and the Quantity EquationVelocity and the Quantity Equationn nThe quantity equation relates the quantity of money(M)to the nominal value
21、of output(P Y).第20页/共46页Velocity and the Quantity EquationVelocity and the Quantity Equationn nThe quantity equation shows that an increase in the quantity of money in an economy must be reflected in one of three other variables:n nthe price level must rise,the price level must rise,n nthe quantity
22、of output must rise,orthe quantity of output must rise,orn nthe velocity of money must fall.the velocity of money must fall.第21页/共46页Figure 3 Nominal GDP,the Quantity of Money,and Figure 3 Nominal GDP,the Quantity of Money,and the Velocity of Moneythe Velocity of MoneyCopyright 2004 South-WesternInd
23、exes(1960=100)2,0001,00050001,500196019651970197519801985199019952000Nominal GDPVelocityM2第22页/共46页Velocity and the Quantity EquationVelocity and the Quantity Equationn nThe Equilibrium Price Level,Inflation Rate,and the Quantity Theory of Money n nThe velocity of money is relatively stable over tim
24、e.The velocity of money is relatively stable over time.n nWhen the Fed changes the quantity of money,it When the Fed changes the quantity of money,it causes proportionate changes in the nominal value causes proportionate changes in the nominal value of output(P of output(P Y).Y).n nBecause money is
25、neutral,money does not affect Because money is neutral,money does not affect output.output.第23页/共46页CASE STUDY:CASE STUDY:Money and Prices during Four Money and Prices during Four HyperinflationsHyperinflationsn nHyperinflation is inflation that exceeds 50 percent per month.n n Hyperinflation occurs
26、 in some countries because the government prints too much money to pay for its spending.第24页/共46页Figure 4 Money and Prices During Four Figure 4 Money and Prices During Four HyperinflationsHyperinflationsCopyright 2004 South-Western(a)Austria(b)HungaryMoney supplyPrice levelIndex(Jan.1921=100)Index(J
27、uly 1921=100)Price level100,00010,0001,00010019251924192319221921Money supply100,00010,0001,00010019251924192319221921第25页/共46页Figure 4 Money and Prices During Four Figure 4 Money and Prices During Four HyperinflationsHyperinflationsCopyright 2004 South-Western(c)Germany1Index(Jan.1921=100)(d)Poland
28、100,000,000,000,0001,000,00010,000,000,0001,000,000,000,000100,000,00010,000100MoneysupplyPrice level19251924192319221921Price levelMoneysupplyIndex(Jan.1921=100)10010,000,000100,0001,000,00010,0001,00019251924192319221921第26页/共46页The Inflation TaxThe Inflation Taxn nWhen the government raises reven
29、ue by printing money,it is said to levy an inflation tax.n nAn inflation tax is like a tax on everyone who holds money.n nThe inflation ends when the government institutes fiscal reforms such as cuts in government spending.第27页/共46页The Fisher EffectThe Fisher Effectn nThe Fisher effect refers to a o
30、ne-to-one adjustment of the nominal interest rate to the inflation rate.n nAccording to the Fisher effect,when the rate of inflation rises,the nominal interest rate rises by the same amount.n nThe real interest rate stays the same.第28页/共46页Figure 5 The Nominal Interest Rate and the Figure 5 The Nomi
31、nal Interest Rate and the Inflation RateInflation RateCopyright 2004 South-WesternPercent(per year)19601965197019751980198519901995200003691215InflationNominal interest rate第29页/共46页THE COSTS OF INFLATIONn nA Fall in Purchasing Power?n nInflation Inflation does notdoes not in itself reduce peoples r
32、eal in itself reduce peoples real purchasing power.purchasing power.第30页/共46页THE COSTS OF INFLATIONn nShoeleather costsn nMenu costsn nRelative price variabilityn nTax distortionsn nConfusion and inconveniencen nArbitrary redistribution of wealth第31页/共46页Shoeleather CostsShoeleather Costsn nShoeleat
33、her costs are the resources wasted when inflation encourages people to reduce their money holdings.n nInflation reduces the real value of money,so people have an incentive to minimize their cash holdings.第32页/共46页Shoeleather CostsShoeleather Costsn nLess cash requires more frequent trips to the bank
34、 to withdraw money from interest-bearing accounts.n nThe actual cost of reducing your money holdings is the time and convenience you must sacrifice to keep less money on hand.n nAlso,extra trips to the bank take time away from productive activities.第33页/共46页Menu CostsMenu Costsn nMenu costs are the
35、costs of adjusting prices.n nDuring inflationary times,it is necessary to update price lists and other posted prices.n nThis is a resource-consuming process that takes away from other productive activities.第34页/共46页Relative-Price Variability and the Misallocation of ResourcesRelative-Price Variabili
36、ty and the Misallocation of Resourcesn nInflation distorts relative prices.n nConsumer decisions are distorted,and markets are less able to allocate resources to their best use.第35页/共46页Inflation-Induced Tax DistortionInflation-Induced Tax Distortionn nInflation exaggerates the size of capital gains
37、 and increases the tax burden on this type of income.n nWith progressive taxation,capital gains are taxed more heavily.第36页/共46页Inflation-Induced Tax DistortionInflation-Induced Tax Distortionn nThe income tax treats the nominal interest earned on savings as income,even though part of the nominal in
38、terest rate merely compensates for inflation.n nThe after-tax real interest rate falls,making saving less attractive.第37页/共46页Table 1 How Inflation Raises the Tax Burden on Table 1 How Inflation Raises the Tax Burden on SavingSavingCopyright2004 South-Western第38页/共46页Confusion and InconvenienceConfu
39、sion and Inconveniencen nWhen the Fed increases the money supply and creates inflation,it erodes the real value of the unit of account.n nInflation causes dollars at different times to have different real values.n nTherefore,with rising prices,it is more difficult to compare real revenues,costs,and
40、profits over time.第39页/共46页A Special Cost of Unexpected Inflation:Arbitrary A Special Cost of Unexpected Inflation:Arbitrary Redistribution of WealthRedistribution of Wealthn nUnexpected inflation redistributes wealth among the population in a way that has nothing to do with either merit or need.n n
41、These redistributions occur because many loans in the economy are specified in terms of the unit of accountmoney.第40页/共46页Summaryn nThe overall level of prices in an economy adjusts to bring money supply and money demand into balance.n nWhen the central bank increases the supply of money,it causes t
42、he price level to rise.n nPersistent growth in the quantity of money supplied leads to continuing inflation.第41页/共46页Summaryn nThe principle of money neutrality asserts that changes in the quantity of money influence nominal variables but not real variables.n nA government can pay for its spending s
43、imply by printing more money.n nThis can result in an“inflation tax”and hyperinflation.第42页/共46页Summaryn nAccording to the Fisher effect,when the inflation rate rises,the nominal interest rate rises by the same amount,and the real interest rate stays the same.n nMany people think that inflation make
44、s them poorer because it raises the cost of what they buy.n nThis view is a fallacy because inflation also raises nominal incomes.第43页/共46页Summaryn nEconomists have identified six costs of inflation:n nShoeleather costsShoeleather costsn nMenu costsMenu costsn nIncreased variability of relative pric
45、es Increased variability of relative prices n nUnintended tax liability changesUnintended tax liability changesn nConfusion and inconvenienceConfusion and inconveniencen nArbitrary redistributions of wealthArbitrary redistributions of wealth第44页/共46页Summaryn nWhen banks loan out their deposits,they increase the quantity of money in the economy.n nBecause the Fed cannot control the amount bankers choose to lend or the amount households choose to deposit in banks,the Feds control of the money supply is imperfect.第45页/共46页