Does Inflation Affect The Price Of Money

Improved Essays
Did you ever think about inflation? Inflation is a continuous increase in the price of goods and services. It means people use the same unit of currency but buy fewer goods and services. In the other word, inflation reduces the purchasing power per unit of currency. Currency is the medium of exchange, including banknotes and coins. People use currency to buy goods and services. We can say, in almost all situations, the value of the currency as the medium of exchange is more than the value of the currency itself. For example, one dollar banknote is more valuable than the same size of paper.
Now we think about a special situation. If inflation keeps for a long time, is it possible that dollar-size of paper is more valuable than one dollar banknote?
In this special situation, the value of the currency will be very different. For instance, a person has a one dollar banknote, he wants to get some cookie. If he
…show more content…
As buyers, consumers tend to monopolize their wealth. For example, someone has one dollar. Now he is more willing to sell it so as to get two dollars. In this situation of infinite repeated this action. He will gain an enormous of amount of wealth as a big fortune in a long term. That case will make big benefits for people who have a lot of wealth already. Like, the monopolists will monopolize their wealth greatly by making money with money, which is increasingly widening the gap between rich and poor. However, at the same case, as sellers, they have no incentive to supply more goods because of continuous deflation. They could leave the labor market and search new ways to make wealth. The way people make money will force the government to stop issuing currency. The circulation of certain currency will have no effect on the current economy. But in a long term, as GDP is not going to increase, the market will go into

Related Documents

  • Improved Essays

    Pennies, what are they worth? To answer that question one must first go back to the dawn of the penny. For centuries, the penny has captivated many with it’s historical significance and representation of America’s accomplishments as a nation; however, one thing that has changed over time is its commercial value. The penny was created with one intended purpose, facilitating the exchange of goods and services, but because of inflation the value of the penny has decreased making it hard for consumers to purchase anything with one single penny. Today pennies can be found under couches, sidewalks, and even in the garbage.…

    • 816 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    The Worthless Pennies What is the penny? To some its a coin, to some, its a waste of time and money. The penny should be abolished and is unnecessary in todays society. We usually throw our pennies in the road or in our car somewhere…

    • 800 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Penny Synthesis Essay

    • 654 Words
    • 3 Pages

    The penny should be kept. Others may argue that the penny is not worth it, but it is very valuable. Even if it is only one cent. The penny has influenced our culture, and eliminating the penny would cause problems. The penny can be changed to be more cost-effective.…

    • 654 Words
    • 3 Pages
    Improved Essays
  • Great Essays

    Penny Argument Analysis

    • 480 Words
    • 2 Pages

    Harvard Economist Greg Mankiw one said, "It costs the mint well more than a cent to make a penny. The solution, in my view, is to get rid of the penny. " This means that the penny costs more to make than they are worth. The materials that are used in the penny are expensive and taxpayers lost millions of dollars for the production of the penny. The production of pennies should be eliminated throughout the United States.…

    • 480 Words
    • 2 Pages
    Great Essays
  • Improved Essays

    College Tuition Costs

    • 639 Words
    • 3 Pages

    Then that put the United States in a lot of debt because there’s no balance between buying and selling. So this will require the United States to produce more goods to sell then that will also help the American people to get jobs. The U.S. goods trade off could be reduced by “between about $190 billion and $400 billion over the course of three years by eliminating global currency manipulation. Without any increase in federal spending or taxation, the United States would reap enormous…

    • 639 Words
    • 3 Pages
    Improved Essays
  • Improved Essays

    Despite what one may think, putting down the t-shirt and keeping the cash can be a simple step for turning a dull purchase into something “...that is all about movement, access, [and] cachet” [Chiarella]. When looking for the real worth of a twenty in this world, it is a must to step outside of the souvenir shop and start learning the language of money with another individual; mostly because that is the best way a person’s cash can be bartered. It’s basically like name dropping or knowing someone to get through the door…

    • 779 Words
    • 4 Pages
    Improved Essays
  • Decent Essays

    Pennies Should Be Retired

    • 517 Words
    • 3 Pages

    On Dec 15, 2014 Huffington post wrote “Can we all just agree that pennies are stupid and need to be retired?” We can't agree. Huffingtonpost surveyed people and showed most people don't want to get rid of it. I strongly believe pennies should be retired because the following reasons. Pennies cost more than face value, countries have done it before, and they are not useful enough.…

    • 517 Words
    • 3 Pages
    Decent Essays
  • Improved Essays

    Penny History

    • 649 Words
    • 3 Pages

    My peers, currency is one of the cornerstones of modern society, but I ask why has the penny remained for hundreds of years while several other coins the United States has minted disappeared? Why must we continue to produce coins which are worth less than nothing? Why did the penny not die out in 2006? Why do we make coins that simply aren’t worth someone’s time and money?…

    • 649 Words
    • 3 Pages
    Improved Essays
  • Superior Essays

    Penny Problem

    • 956 Words
    • 4 Pages

    The U.S. penny has been around for a long time. A version of the penny was the first currency ever issued by the United States over two hundred years ago (A Brief History of the U.S. Cent, n.d., para.1). In the past, it was a very important part of the nation’s financial infrastructure. However, its value in today’s economy is highly debatable. In fact, the penny’s very existence could soon be just a footnote in the history books.…

    • 956 Words
    • 4 Pages
    Superior Essays
  • Superior Essays

    If you bought a house for $150,000 with an annual inflation rate of 4 percent, it would take about 18 years for the house’s worth to double based on the Rule of 72. b. If you bought a Picasso painting at last week 's auction for $200,000 and the annual inflation rate is 10 percent, how long would it take to double your money? If you bought a painting by Picasso for $200,000 with an annual inflation rate of 10 percent, it would take around 7 years for the painting’s worth to double. c.…

    • 1506 Words
    • 7 Pages
    Superior Essays
  • Improved Essays

    I believe that money does matter, but to an extent. Money is the quickest way for consumers to obtain everything that they desire. Without money it would be difficult for consumers to get the goods that they need. According to the article “Why Does Money Matter?” they describe money as a tool.…

    • 357 Words
    • 2 Pages
    Improved Essays
  • Superior Essays

    Inflation In Canada

    • 1208 Words
    • 5 Pages

    The ability to spend money without incurring debt is tough. Whether it involves having to pay for post-secondary education or having to purchase a new car, many people are required to undertake debt. Recently, many Canadians, are facing higher levels of debt which is threatening the economy. In fact, the debt levels for Canadians is at an all time high as households have one dollar and sixty five cents of debt for every one dollar of disposable income (Parkinson, 2016). The illustrates that the Canadian economy is doing well as more people are taking on debt to purchase the items that they want.…

    • 1208 Words
    • 5 Pages
    Superior Essays
  • Improved Essays

    For example, If United States experience an inflation period, the consumer’s buying power will drop and result in the fall of Apple Inc.’s sales. At the same time, the US dollar drops significantly due to the inflation. Therefore, Apple Inc. acquires currency…

    • 1250 Words
    • 5 Pages
    Improved Essays
  • Improved Essays

    The Three E's Analysis

    • 998 Words
    • 4 Pages

    Chris Martenson explained, during the Accelerated Crash Course, how the economy and financial status of our country will continue to rapidly decline if we do not adress it now. Martenson also suggested that everyone should always be prepared for times like these. He expounded on the Three E’s which are important topics we should focus on to save the economy from deteriorating. The Three E’s include the economy, energy, and environment and all three criteria should be thought of in the same sense with one fundamental force: Mathematics.…

    • 998 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    In The American Economic Review (1948), The Role of the Monetary Policy by Milton Friedman debates about how monetary policy can affect an economy. In the earlier days the responsibles of the monetary authorites were to stifle any rise in the interest rate, price and output stability and to maintain the gold standard. The monetary authories did not pay much attention to the monetary policies which lead to the The Great Contraction which destroyed the economy. This prove to show that Keynesian was impotent to suggested that the depression was caused by collapsing of investment, shortage of investment opportunities and stubborn thriftiness. The author ridicules other economists about their point of view of The Great Contraction and the solution…

    • 1049 Words
    • 5 Pages
    Improved Essays