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Lecture

1BB3 FEB 28th

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Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy
Semester
Winter

Description
Economics Lecture Notes February 28 , 2013 th Inflation Tax: There are 3 ways for a government to raise revenue: 1. Direct Taxes 2. Borrowing – Future Tax 3. Printing Money – Tax on Money Hyperinflation: Hyperinflation is inflation that exceeds 50 percent per month. Example: Suppose that a large cup of coffee at Tim Horton’s costs $1.75 on January 1 . February 1: $2.63 March 1: $3.95 April 1: $5.93 May 1: $8.90 June 1: $13.35 July 1: $20.03 ..... etc With a Hyperinflation, people usually go out and buy whatever they can and trade for it later. We call this a barter economy. Fisher Effect: - Nominal Interest Rate = Real Interest Rate + Inflation Rate - In the long run, a change in money growth does not affect the real interest rate -Fisher effect: The one-for-one adjustment of the nominal interest rate to the inflation rat
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