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09 April 2007:
inflation in hell.
have you ever wondered, where do hell notes go to? heaven or hell?
the theoretical answer is hell. but actually its for those in heaven. so what? we send the money to hell and they change the currency back to heaven? anw thats not the point now.
the point is, hell notes are so bloody cheap. we humans can afford to buy a stack of 10000000000 notes for the deceased. one person burn this stack of notes. another burns another stack. so eventually what we will get is inflation in hell or heaven, whichever it is. this increase in money supply will greatly increase aggregate demand (AD) in hell or heaven (HOH). no matter the economy is near or below full employment, the enormous increase in AD will offset any possible increase in aggregate supply (AS) hence causing inflation (refer Fig. A below).
 Fig. A: inflation in HOH. (click to enlarge)
so ultimately a bread in HOH may cost like H$10000.
the increase in GPL may offset the increase in national income hence reducing the purchasing power of the people. this will mean a decrease in material well-being. but standard of living (well eugene said it was supposed to be standard of deceased) not only includes the material aspect but also the qualitative aspect. as the hell notes are super big in size, the people will face difficulty in carrying them. also, they will have to carry large amount of notes around because there is inflation. this leads to a higher tendency of crime because it is easy to snatch a note from someone's pocket and there is greater incentive to rob because it leads to a more than proportionate expected return.
to curb inflation and its side effects, the jade emperor has to maintain a steady and sustained economic growth, low and stable inflation, full employment and a healthy balance of payments. there are two main types of policies that the jade emperor can adopt to control inflation in the economy. they are: demand-management policies which consist of monetary and fiscal policies and supply-side policies which include prices and wage controls (income policy).
because the inflation in HOH is mainly caused by the increase in AD, the jade emperor has to adopt contractionary policies to curb demand-pull inflation.
the main policy the jade emperor should adopt is reducing money supply, which, sadly, is not covered in our economics lecture.
the jade emperor can reduce money supply to HOH by limiting the printing of hell notes. the decrease in supply of hell notes will lead to a shortage of hell notes to be offered. hence, there is an upward pressure on price. as prices of hell notes goes up, there will be less quantity demanded for hell notes due to income effect. therefore, humans send less money to HOH.
this decrease in supply of hell notes will lead to a multiplied decrease in AD as people in HOH now have a lesser disposable income.
this would then lower the GPL.
however, the effectiveness of this measure depends on the changes in human's income levels. if the income levels of humans goes up, this measure would be ineffective. also, this measure may not be effective because there is time lag. time is needed for the imperial decree to be passed on to humans in the form of print.
wooh finally i decide to stop my crap. :D
my medicine is taking effect. drowsy~
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09 April 2007:
inflation in hell.
have you ever wondered, where do hell notes go to? heaven or hell?
the theoretical answer is hell. but actually its for those in heaven. so what? we send the money to hell and they change the currency back to heaven? anw thats not the point now.
the point is, hell notes are so bloody cheap. we humans can afford to buy a stack of 10000000000 notes for the deceased. one person burn this stack of notes. another burns another stack. so eventually what we will get is inflation in hell or heaven, whichever it is. this increase in money supply will greatly increase aggregate demand (AD) in hell or heaven (HOH). no matter the economy is near or below full employment, the enormous increase in AD will offset any possible increase in aggregate supply (AS) hence causing inflation (refer Fig. A below).
Fig. A: inflation in HOH. (click to enlarge)
so ultimately a bread in HOH may cost like H$10000.
the increase in GPL may offset the increase in national income hence reducing the purchasing power of the people. this will mean a decrease in material well-being. but standard of living (well eugene said it was supposed to be standard of deceased) not only includes the material aspect but also the qualitative aspect. as the hell notes are super big in size, the people will face difficulty in carrying them. also, they will have to carry large amount of notes around because there is inflation. this leads to a higher tendency of crime because it is easy to snatch a note from someone's pocket and there is greater incentive to rob because it leads to a more than proportionate expected return.
to curb inflation and its side effects, the jade emperor has to maintain a steady and sustained economic growth, low and stable inflation, full employment and a healthy balance of payments. there are two main types of policies that the jade emperor can adopt to control inflation in the economy. they are: demand-management policies which consist of monetary and fiscal policies and supply-side policies which include prices and wage controls (income policy).
because the inflation in HOH is mainly caused by the increase in AD, the jade emperor has to adopt contractionary policies to curb demand-pull inflation.
the main policy the jade emperor should adopt is reducing money supply, which, sadly, is not covered in our economics lecture.
the jade emperor can reduce money supply to HOH by limiting the printing of hell notes. the decrease in supply of hell notes will lead to a shortage of hell notes to be offered. hence, there is an upward pressure on price. as prices of hell notes goes up, there will be less quantity demanded for hell notes due to income effect. therefore, humans send less money to HOH.
this decrease in supply of hell notes will lead to a multiplied decrease in AD as people in HOH now have a lesser disposable income.
this would then lower the GPL.
however, the effectiveness of this measure depends on the changes in human's income levels. if the income levels of humans goes up, this measure would be ineffective. also, this measure may not be effective because there is time lag. time is needed for the imperial decree to be passed on to humans in the form of print.
wooh finally i decide to stop my crap. :D
my medicine is taking effect. drowsy~
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