TheOptimalInflationRate.pptVIP

The Optimal Inflation Rate Inflation has steadily gone down in rich countries since the early 1980s. The attempt to reduce it even further depends on the costs and benefits of inflation. The Costs of Inflation We’ve seen how very high inflation can disrupt economic activity. The debate in OECD countries today, however, centers on the advantages of, say, 0% versus 4% inflation a year. Within that range, economist identify four main costs of inflation: (1) shoe-leather costs, (2) tax distortions, (3) money illusion, and (4) inflation variability. Shoe-Leather Costs Shoe-leather costs are th