Themonetarysystempricesandinflation货币制度价格与通货膨胀

Themonetarysystem,prices,andinflationOutlineWhatisamonetarysystem?IndexnumbersTheConsumerPriceIndex(CPI)TheCPIandtheInflationRateAdjustingthemoney(nominal)wageforinflationusingtheCPITheCostsofInflationIstheCPIaccurate?ConsequencesofoverstatinginflationThemonetarysystemThemonetarysystemsestablishestwothings:Theunitofvalue(oraccount)ThemediumofexchangeInEngland,thepoundisourunitofvalue.Thepriceofbusfare,drycleaning,softdrinks,andGDPisexpressedinpounds.IntheU.S.,thedollarservesastheunitofvalueandmediumofexchange.Ifyouwanttobygoodsandserviceshere,youneeddollars.RecallthatGDPin2004was11.73trilliondollarsThisNoteIsLegalTenderForAllDebts,PublicandPrivateFiatMoney:AnythingwhichservesasameansofpaymentbygovernmentdeclarationYouarewillingtoacceptmoneynotbecauseitis“backed〞bypreciousmetals;butratherbecauseyouknowitisgenerallyacceptableinexchangeIndexnumbersAnindex

isaseriesofnumbersusedtotrackavariable’sriseorfallovertime.Indexnumbersaremeaningfulinarelativesense—bycomparingoneperiod’sindexnumberwiththatofanotherperiod.Ingeneral,anindexnumberiscalculatedas:ValueofthemeasureinthecurrentperiodValueofthemeasureinthebaseperiod100Example:ViolentActsonTVWeselecttheyear1996asourbaseyear,orbenchmarkperiod.Inthatyear,therewere10,433violentactsonTV.Thus,ourindexforthecurrentyearwouldbecalculatedasfollowsNumberofviolentactsinthecurrentyear10,433100Iftherewere14,534actsin2000,then:Thus,TVviolenceincreasedby39.3percentbetween1996and2000.TimepricesInflationInflationisasustainedincrease

inthepricesofgoodsandservices

(orthecostofliving).Tomeasure

inflation,welookatchangesinthe

priceofamarketbasketofgoods

orserviceshouseholdstypically

purchasewiththeirincome

WeusetheCPItomeasurechangesinthecostoflivingexperiencedbyhouseholds.TheCPIisthe“narrow〞priceindexinthatthemarketbasketusedtoconstructitincludesitemspurchasedbyhouseholds.BureauofLaborStatisticseconomicassistantscheckthepricesof80,000itemsin30metropolitanareaseachmonth.TheinflationrateissimplythepercentagechangeintheCPIfromoneperiodtothenext.1982-84isthebaseperiodTheConsumerPriceIndex(CPI)TheBLSnowrevisesthemarketbasketevery2yearsConsumerPriceIndex(1982-84=100)Source:BureauofLaborStatisticsOnaverage,thepricesofgoods

andservicesintheCPImarketbasket

increasedby3.7%from1999to2000Tocomputethe2000inflationrateInflation2000=[(CPI2000

CPI1999)–1]100Thuswehave:Inflation2000=[(174.5168.3)–1]100=3.7percentSource:TheEconomistTheinflationmythInflationcannotbyitselfdecreaseaveragerealincome.InflationcanshiftpurchasingpowerfromsomegroupstoothersInflationinnotanequalopportunityvillain.Thatis,inflationarbitrarily,andunfairly,redistributesrealpurchasingpowerfromsomegroupstoothers.RedistributiveCostsofInflationTheracetostayaheadofinflationInflationerodesthepurchasingpowerofincomeandsetsoffaracetostayaheadofthecostofliving.Teachers,fireman,truckdrivers,nurses,accountants,plumbers,socialsecurityrecipients,andothersstrivetoincreasetheirincomessoasnottosufferadecreaseintheirstandardofliving.Somegroupsdobetterthanothers.MachinistsJobdescription:Setupandoperateavarietyofmachinetoolstoproduceprecisionpartsandinstruments.

MeanCPIYearAnnualWage(1982-84=100)1995$31,270152.42005$34,790196.4Source:BureauofLaborStatisticsAremachinistsbetteroffin2005?Whyarewesmiling?BecauseoursocialsecuritybenefitsareindexedtotheCPIWhydoesn’tCongressindextheminimumwagetotheCPI?

NominalRealValueYearValue(1982-84)1938$0.25$1.7719490.401.6819550.752.8019611.153.8519661.253.8619742.004.0619782.654.0619893.352.7019964.753.0320045.152.73ValueoftheFederalMinimumWageSource:U.S.DepartmentofLaborUnexpectedinflationredistributesreal

incomefromlenderstoborrowers

Repaymentsschedulesformostdebtcontractsarefixedinnominalormoneyterms—thatis,debtsarenotindexedtoinflation.Inflationerodestherealvalueofrepayments.Savings&Loaninstitutionslostmoneyonlongtermmortgagesinthe70sand80s.Weboughtthishousein1957for$19,000.Wefinancedthehouseona30yearmortgagenoteat3.5percentinterest.Canyouguesswhatourmonthlypaymentwas?Answer:$85.32InflationunderminesconfidenceIstheCPIaccurate?TheBoskinCommissionreportedtoCongressin1996thattheCPIover-estimatedtheactualinflationrateinrecentyearsbyanaverageofabout1.4%.ManyeconomistschallengetheBoskinfindings;however,mostagreethatinflationisoverstatedbytheCPISourcesofbiasintheCPIThesubstitutionbias:Peopletendtosubstituterelativelycheaperitemsinplaceofthosethathavebecomerelativelymoreexpensive.Growthofdiscounting:Peoplereacttohigherretailpricesbyshoppingatthe“bigbox〞highvolumediscountretailerssuchasWal-MartandHomeDepot.Also,internetshoppingforairlinetickets,hotels,andotheritemsallowspeopletostretchtheirspendingpower.NewTechnologies:Newitemssuchascellularphones,pagers,andPCsentertheCPImarketbasketwithalag.Thepricesoftheseitemshasfallenastheirpopularityhasrisen.Qualitybias:Forexample,theCPIdoesnotfullyadjustforthefactcarpricesrisebecauseofnewfeaturessuchasairbagsandantilockbrakes.Anotherexample:thecostofhospitalization.Whatareconsequencesofoverstatinginflation?Changesinrealincomeovert