ECON-200 Lecture Notes - Lecture 20: Seigniorage, Hyperinflation In The Weimar Republic, Nominal Interest Rate
9 Sep 2020
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Document Summary
The figure shows that velocity of money is relatively stable over time. The irrelevance of monetary changes for real variables is called money neutrality. One crucial qualification (which we will discuss in future lectures) the distinction between the short and long run. For your information, the german hyperinflation was not the highest ever it was around 30,000% annually, so prices doubled every four days. It was at its peak 80 billion % annually (prices doubled every day) The post world war ii hyperinflation in hungary was the highest so far annual inflation over 10 quadrillion % (prices three times in two days) Why does the government print too much money? inflation tax. An inflation tax is like a tax on everyone who holds money. Nominal interest rate = real interest rate + inflation rate. According to the fisher effect, when the rate of inflation rises, the nominal interest rate rises by the same amount.
