Essay on Inflation

historical definition currency has either been backed by an asset (i.e. gold) or backed by government guarantee in credit, which is essentially just promise of value. Money being backed by gold or other assets has consistently retained its value and inflation rate. On the other hand, “fiat currency” (money not guaranteed in value by physical commodity) has shown to be more elastic to cater to economic needs. There are cons as well: gold is a very scarce resource. When the world relied on the…

between state leaders and central banks. Utilizing interest rates to regulate inflation can lead to unattractive outcomes. “In particular, raising interest rates to cut back on economic growth when jobs are expanding rapidly is not a good way to make friends!” (Shively 113). Political scientists and economist have alleged that any central bank closely controlled by political leaders would not necessarily work to reduce inflation. If the state…

only hold money and bonds, but can invest their income in assets such as bonds, equities or goods. Friedman treated money like any other asset, with the assumption of an individual holding a certain amount of real income. He then assumes that if inflation were to arise, these agents will want to hold higher nominal balances so that their real money balances are constant. Thus, Friedman insisted that when an individual’s income increases, so will the demand for money and declines when the rate of…

country issues a global reserve currency because of its global importance as a medium of exchange, it was also facing a growing problem of inflation at home (Ghizoni, Nixon Ends Convertibility of US Dollars to Gold and Announces Wage/Price Controls, 1971). At first the Nixon administration and the Federal Reserve believed in a slow gradual approach by lowering inflation with a minimum increase in unemployment and would tolerate an unemployment rate of up to 4.5 percent (Ghizoni, Nixon Ends…

What do we know about the exchange rate pass‐through? Throughout history, there has been significant debate within international economic literature over fixed and flexible exchange rate regimes. Presently, Australia uses a flexible exchange rate system and argues that this would allow a more efficient system of international adjustments to occur. However, academics have identified that foreign exchange rate markets, under flexible regimes, are vulnerable to a significant amount of volatility.…

Monetary Policy and the Great Depression are related to each other in an economic way. Monetary policy is said to have specifically effected the Great Depression because of the stabilization of money value and trade. The concept of the effect has been debated over for many years even as recent as now. In short the Great Depression was an economic downturn in the United States. The Great Depression consisted of the stock market crash, the failure of people being able to spend and company unable…

There is an argument between which theory works best, side-supply or demand-side. They are both important because you need both the supplier and consumer. When you comparing and contrasting the two arguments it is obvious that they are both needed to make our economy better. Supply-side economics is also known as Reaganomics or the "trickle-down" policy. Side-supply has three parts: tax policy, regulatory policy and monetary policy. Tax cuts for investors and entrepreneurs gives a greater…

Tangibility: Tangibility represents a firm’s investment in fixed asset as a component of total asset. Tangible assets are broadly accepted determinants of capital structure because fixed assets provide security to the capital provider by directing a claim against capital erosion. Information asymmetry between borrowers and firms increases the agency cost of debt which can be reduced by using adequate tangible assets that may serve as collateral to issue debt (Jensen & Meckling, 1976). This is…

heads on what more can be done to achieve growth and stoke inflation. Many believe that the central banks have no tool left to tackle…

not as bad because the GDP is large. Because their economy is in a stable position the citizens will also be in a good state. Inflation rates in America is 1.6%, this is really good because the ideal rate is 1%-2% one of the reasons why it 's good is because low inflation rates mean low interest rates for the citizens so they don 't have to pay as much interest. Inflation rates in Sudan is very high, it 's 36.9%. This is bad because people will buy as many things even if they don 't…