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John Stossel: Currency Conundrum (Links to an external site.)
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John Stossel Speaks to Ex Federal Reserve Employee
User: getzladelron - Added: 7/13/13
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1. What is inflation?
2. What does inflation do to the value of our money? Is it a good or bad thing? Defend your answer.
Specific to "Currency Conundrum":
3. David Barker said, "central planning doesn't work as well as markets." What does this mean? Explain why you agree or disagree.
4. What do you think about the idea of private money? How do you think it would work? If people were free to use whatever money they trusted, do you think competition would provide incentives for people offering private money to retain the value of their currency and to avoid inflation?
Specific to "A History of Booms and Busts":
5. According to Stephen Davies, when central banks manipulate the money supply artificial pressure is placed on interest rates since the market is not determining the equilibrium interest rate. This theory helps explains malinvestments. Is this a justifiable theory? Defend your answer.
Explanation & Answer
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Inflation refers to the rate at which the general level of prices for both goods and services
rise, and as a consequence, the purchasing power of a currency falls. This means that the cost of
specific products increases over time and the value of a unit of money drop (Horwitz, 2012). The
central banks of most nations through monetary policies control inflation, while at the same time
help avoid deflation, for the smooth running of the economy. The monetary policies are
employed to regulate and moderate, price stability, long-term interest rates, and employment,
which are factors that influence inflation.
Inflation decreases the value of money over time. Also known as the time value of
money, the worth of a dollar today is more than the worth of a dollar after a year...