Inflation

Please respond for peer comments:

1) The topics that I found interesting are Money illusion, 45 Degree reference line, Relation between the AD and C+I+G+X Curve, Crowding out effect and Steps undergoing by the government to reduce its deficits. I was surprised about the illegal inflation as I never came across this topic before. I do have questions listed below:

Is illegal inflation useful or not?

Is it possible for all the governments to do inflation illegal?

What are the circumstances that people or government has to face later due to illegal inflation?

2) The crowding-out effect is a relatively new term that I am not familiar with. It is a five-step process, and it first develops when government spending exceeds tax revenues. If it reaches the last step, then this means that there is more government spending that exists and less consumption. In Chapter 14, it goes into detail about the public debt. This can hurt future generations due to higher tax rates and affect the overall economic growth.

3) In Chapter 10, I found the interest rate effect interesting. I thought it was interesting because I have to pay interest on loans in order to pay for attending college. The interest rate effect also causes a downward slop in the aggregate demand curve.

In Chapter 11, I thought that demand-pull inflation and cost-push inflation were interesting. Demand-pull inflation occurs when there in an increase in aggregate demand that differs from the increase in aggregate supply. Cost-push inflation occurs when there is a decrease in short-run aggregate supply.

In Chapter 12, I found it interesting to find out what producer durables were. Capital goods are producer durables, and that just means that they are goods used to make other goods.

In Chapter 13, I had questions in regards to the Richardian Equivalence Theorem. I was confused on how someone could assume that taxes would be raised in the future due to an increased deficit that does nothing to aggregate demand.

In Chapter 14, I found it interesting that the net public debt increased during World War II. I also found it interesting that it has been on the rise and fall ever since, and is currently increasing again.

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