Completed quickly and followed instructions given. Grammar, spelling, etc. was all good as well. Thank you so much! Will hire in the future.
Reflection paper/Reflection essay
27/08/2022
Most economists argue that low and stable inflation is consistent with economic growth but that high or unstable inflation (and especially unexpected inflation) is harmful.
Inflation has numerous costs:
1) “Shoeleather” costs — this mainly refers to the cost of converting non-cash assets to cash. With high inflation, holding cash is costly, as high inflation erodes the purchasing power of money. Consider Germany in the 1920s, Zimbabwe in the 2000s, up to 2009. (Zimbabwe’s inflation was so astronomically high that it stopped printing its own currency in 2009.)
This term could also refer to the inconvenience in general of searching for alternatives and of adjusting to price changes.
2) Menu costs — this refers to the costs of changing posted prices — not just on restaurant menus, of course.
3) Distortion of relative prices — this problem is related to menu costs. As firms continuously need to adjust prices (and as consumers continuously need to learn new prices), the adjustments inevitably lead to changes in relative prices that could lead to misallocation of resources.
4) Tax distortions — the simplest example is “bracket creep”. If we set income tax rates based on income levels (as we do in the U.S. and in many other nations), inflation will cause all income levels to “creep” into higher marginal tax rate brackets. This can happen with any tax based on progressive marginal rates.
5) Arbitrary redistribution of wealth — unexpected inflation changes the costs and benefits of any fixed contract, especially those of long-term duration. The simplest example is the distribution between lenders and borrowers, but any fixed contract with obligations could suffer the same type of redistribution. In the case of a fixed-rate loan, the borrower benefits (and the lender suffers) from an unexpected increase in inflation, because the repayment has a lower value than expected.
It is worth noting that significant deflation has very similar problems. Generally, low and stable inflation minimizes these costs and accommodates economic growth. The real problems come from instability (lack of predictability).
Show more
Completed quickly and followed instructions given. Grammar, spelling, etc. was all good as well. Thank you so much! Will hire in the future.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more