Question

A .When inflation occurs some economic agents gain and some lose. Who would gain and lose if deflation occurs? Why? What will happen to interest rates and investment according to Keynesian and Classical/ Monetarist theories?

Is inflation still a possible threat? What could cause a rise in inflation? Is higher inflation desired? Suggest some possible scenarios.

B.  

Watch the interview with Nobel Economist Joseph Stiglitz, "Joseph E. Stiglitz: Let's Stop Subsidizing Tax Dodgers"

Part 1:    http://billmoyers.com/episode/joseph-e-stiglitz-let%E2%80%99s-stop-subsidizing-tax-dodgers/

Part 2: http://billmoyers.com/episode/full-show-how-tax-reform-can-save-the-middle-class/

Also Watch "Saving Capitalism" by Robert Reich on youtube (https://www.youtube.com/watch?v=0iQYWPXAHow&t=840s) or on Netflix (if you have it) Netflix Original Saving Capitalism by Robert Reich

Respond to the following question: Please comment on the discussion. How does fiscal policy determine the rules of the market? How does the tax system foster inequality and effect the economy and market structures? Do you agree or disagree with the need to change the tax system? Do you think changing the tax system is possible in the current political economy? How will the tax bills which just passed the Senate and Congress effect your taxes? How will the effect inequality? What are your suggestions?  

Answer 1

Inflation: Inflation is nothing but rise in general prices,

Deflation is something which is opposite to inflation and general price decrease will occur, If deflation occurs overall GDP figure of the country would fall, The biggest beneficiary of deflation ofcourse is consumer, He will get much more goods for the same amount of cash paid

Interest rates will fall due to deflation, The demand for money would decrease and Intrest rates will just fall.

If deflation occurs investment will go up, But it will go up only becasue of one reason the cost of borrowing will go down bringing down the project cost

Inflation is always a natural threat to any economy, It did not occur in last 30 years does not mean it wont occur in future

Dollar collapse might cause inflation, The inflation due to dollar collapse would be hyper inflation, which will destroy economy.

Oil price increase to historic highs again can easily cause inflation

Collapse of supply chains in China can also cause huge global inflation, Or even intentional shut down of old factories in China can cause similar effect.

War in middle east with non-american actors can be serious threat and could cause very severe shortages.