Average inflation rates tend to be higher in countries that have relatively weak judicial systems and...

Average inflation rates tend to be higher in countries that have relatively weak judicial systems and property rights (remember chapter 1 and the importance of secure property rights?). Why do you think this is the case? Would you expect these countries to have higher or lower national debt? Why?

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Answer:-

Inflation is defined as the rate at which the general level of prices for products and services is increasing and, as a result, the purchasing power of money is declining.

A nation's economic organization and property rights system are sensibly good predictors of economic forecast. Nations with free market economies in which property rights are protected be likely to accomplish greater economic growth rates than those countries where property rights are weakly protected. Economies with weak property rights mean widespread corruption.

Countries that put low values on private property have fewer protections for that property and expected to have fewer concerns on reducing its value via seignorage. Moreover, countries with a smaller number of property rights are liable to be less productive.

This will have an effect on government funds with a small tax base from which to draw resources and wealth. With this given a small tax base, it is not astonishing that these governments turn to printing more money that is seignorage to make its repay its obligations.

Therefore, it is concluded that nations with a weak judicial system and property rights tend to have higher average inflation due to lower productivity and their actions to reduce debt by printing more money.

Rahul Sunny answered 2 years ago

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Average inflation rates tend to be higher in countries that have relatively weak judicial systems and...

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