Essay On The 1920s Economic Boom Video
Mr Whitehouse Explains - The 1920s Economic Boom Essay On The 1920s Economic Boom.What if Money Became Increasingly Valuable?
At the beginning of the chapter, we asked you to consider whether you would like to live in an economy in which the purchasing power of money rises every year. Consider first that the only way for the purchasing power of money to increase is for the price level to fall; in other words, deflation must occur.
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Would replacing rising prices with falling prices necessarily be a good thing? So, it is likely that, on average, people would not see the purchasing power of their incomes increase even if the purchasing power of any currency they hold would increase.
Another downside to an economy experiencing deflation is that the real interest rate will be greater than the nominal interest rate, which can be bad news for anyone who has borrowed, including those with substantial mortgage loans.
So, you are probably better off living in an economy experiencing mild inflation than one experiencing deflation.]
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