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In: Economics

The inflation -------------------- refers to the reduction in the real value of savings


The inflation -------------------- refers to the reduction in the real value of savings, cash holdings, and non-indexed interest income that follows from an increase in the -------------- level

Irving Fisher thought the Fed should target a 0% inflation rate. This policy is called ------- seigniorage.

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Expert Solution

The inflation refers to the reduction in the real value of savings, cash holdings, and non-indexed interest income that follows from an increase in the ---PRICE-- level

Reason- Rise in price level leading to fall in the real value is called inflation.

Irving Fisher thought the Fed should target a 0% inflation rate. This policy is called LIQUIDITY TRAP.

Reason- When interest rate is zero people hold to money as it also gives zero interest rate and people are not willing to buy bonds. Increase in quantity of money doesn't induce people to buy bonds but further decreases the interest rate. This situation is called liquidity trap.

Rahul Sunny answered 1 year ago
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