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Consequences of High Inflation

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NomotivationF:
Hey here are my notes on this,

Resource misallocation
Investment decisions will be distorted, and a loss of confidence in money as a medium of exchange will lead to a decline in overall economic efficiency. High inflation produces a misallocation of resources as economic agents will constantly look for ways of protecting their current and future levels of income. Inflation encourages a shift away form productive investment that generates economic and employment towards speculative investments such as gold, artwork and collectables. Those who have the most wealth will have the greatest capacity to hedge in this way•High inflation also distorts price signals and reduces the effectiveness of the price system in allocating resources. Consumers are uncertain about whether the price increase was due to changes in quality. Firms may be less confident that rising prices are indicative of increasing opportunity for profit•High inflation also wastes time in terms of firms having to constantly change prices and communicate them to consumers .

Re distributive effects
High rates of inflation creates winners and losers.Inflation causes an arbitrary and unexpected redistribution of income. Unanticipated inflation will lead to an arbitrary redistribution of income in the manner described in the table to the right. However, if economic agents anticipate inflation they can protect their position by making wise decisions.
Winners - Borrowers, strong trade unions, holders of real assets.
Losers - Lenders, weak trade unions, holders of money assets, exporters, fixed income earners

Seamus Wong:

--- Quote from: NomotivationF on May 04, 2019, 06:46:36 pm ---Hey here are my notes on this,

Resource misallocation
Investment decisions will be distorted, and a loss of confidence in money as a medium of exchange will lead to a decline in overall economic efficiency. High inflation produces a misallocation of resources as economic agents will constantly look for ways of protecting their current and future levels of income. Inflation encourages a shift away form productive investment that generates economic and employment towards speculative investments such as gold, artwork and collectables. Those who have the most wealth will have the greatest capacity to hedge in this way•High inflation also distorts price signals and reduces the effectiveness of the price system in allocating resources. Consumers are uncertain about whether the price increase was due to changes in quality. Firms may be less confident that rising prices are indicative of increasing opportunity for profit•High inflation also wastes time in terms of firms having to constantly change prices and communicate them to consumers .

Re distributive effects
High rates of inflation creates winners and losers.Inflation causes an arbitrary and unexpected redistribution of income. Unanticipated inflation will lead to an arbitrary redistribution of income in the manner described in the table to the right. However, if economic agents anticipate inflation they can protect their position by making wise decisions.
Winners - Borrowers, strong trade unions, holders of real assets.
Losers - Lenders, weak trade unions, holders of money assets, exporters, fixed income earners

--- End quote ---

What source(s) have you derived these notes from? They seem quite detailed - much more detailed than anything that I can extract from my own textbook.

NomotivationF:

--- Quote from: Seamus Wong on May 04, 2019, 08:50:18 pm ---What source(s) have you derived these notes from? They seem quite detailed - much more detailed than anything that I can extract from my own textbook.

--- End quote ---

I make my notes from what the teacher tells us and his power-points and sometimes add in extra info from the textbook

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