AB/204 AB204 AB 204 UNIT 7 DISCUSSION 2

AB 204 UNIT 7 DISCUSSION 2

Unit 7: Money, Banking, and the Federal Reserve System - Discussion

General Information:

To be an effective learning tool the Discussion Board topics require your active discussion of the topic with at least two of your classmates.

• First post made during, or before, Saturday.
• Posts on at least 3 different days.
• Responses to at least two other classmates.
• Substantive posts that stimulate further active discussion, posts that accurately reflects the learning, that are logical, and clearly presented with correct spelling, word usage, and grammar.
• To be counted as a substantial post, your main post to the Discussion topics should be at least 200 words per Discussion topic.

How Money Affects the Economy

The Discussion topics deal with money, the Federal Reserve System, and the effects of money growth on the rate of inflation. The specific discussion areas include the various forms and uses of money, the roles of the Federal Reserve System, money supply, money demand, monetary policy instruments, costs of inflation, and inflation as a tax.

Read Chapters 16 and 17, and remember to include references and links to the websites that you feel are important contributors to your posts (comments). Respond to two of the following Discussion topics.

Topic 2

In economics, inflation is considered as a tax. There are also various costs of inflation.

1. What is the inflation tax, and how might it explain the creation of inflation by a central bank? Explain how inflation affects savings and investment.
2. Inflation distorts relative prices. What does this mean and why does it impose a cost on the society?