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The problematic part of the statement, is the "because of other reasons not important here" part . In other words: "ignore general equilibrium" -which is an unacceptable statement to make when discussing government policy and actions. Consider the naive quantity theory of money: $$PQ = VM \tag{1}$$ $P$ is the price level, $Q$ is output produced (measured ...


4

I think Ms Vallejo's argument is based on (a) a slightly idiosyncratic definition of the term "inflation" and (b) a disregard for the difference between short run and long run phenomena. She is correct in mentioning that in the short run, various cost shocks -- e.g., a devaluation that leads to imported inflation, or excessive wage demands that are ...


3

Certainty equivalence in the context of the Permanent Income Hypothesis implies that $u'(E_t[c_{t+1}]) = E_t[u'(c_{t+1})]$, which only holds if marginal utility $u'(\cdot)$ is linear (by linearity of expectations) and thus only if actual utility $u(\cdot)$ is quadratic. To see where this comes from, consider the utility maximization problem of a ...


1

to give you a straight answer: In the short run she is not contradicting the economic theory. Look to the basic identity in quantitative money theory: $PQ = VM$ The identity does not give you the specific direction on the effect. It may be that the monetary authorities of Argentina does not want to face a drop in Q, and then just decide to supply more ...


1

Nominal rigidities, the idea that prices are easier to adjust up than down, are thought to be a major channel for the harm of deflation. In principal, the growing supply of bitcoins helps offset the general economic growth leading to less deflation. The following is the rule for determining how difficult it is to mine bitcoins: The difficulty is the ...


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