What are the costs and benefits of inflation

What are the costs and benefits of inflation

What is it The costs and benefits of inflation? Let’s clear up the misunderstanding: If corporations and trade unions rationally negotiated over… pay That is, as far as the purchasing power of workers is concerned, inflation must sooner or later raise nominal wages, unless the trade unions have sufficient bargaining power.

Returning to costs, a distinction must be made between expected inflation and unexpected inflation, that is, surprise with regard to predictions regarding future inflation. The main costs of the expected inflation are allegiant.The cost of shoe solesand the cost of changing prices (“The cost of rollsThe first cost is the time wasted in constantly going to the bank to withdraw money from one’s account or sell interest-bearing securities such as government bonds, to avoid holding too much money (cash or deposits) on average, which loses value. On the other hand, The cost of listings consists of the time lost by companies in changing the prices of their products and services to adjust them to inflation.

From this also follows “to mess upFor relative prices between different commodities, as not all producers change prices on the same day. The cost of unexpected inflation is an unintended redistribution of purchasing power: in a loan, the lender loses resources to the borrower because it lends at a lower real interest rate (nominal interest minus real inflation) than it initially expects.

Finally, this is the benefit of expected inflation: if the labor market is such that real wages should fall (demand for labor falls relative to supply) and if it is true that workers oppose nominal wage cuts, then inflation effectively modifies real purchasing wage power to lowest. To whom do we owe this biting theory about the benefits of inflation? Pinochet? Friedman? No, you find it in Keynes’ general theory.

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