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By Alain Lipietz

During this seminal booklet, Alain Lipietz, considered one of France's so much distinct Marxist economists, explores the position of cash and credits within the reasons of the Nineteen Eighties global stoop. Lipietz provides a cogent and convincing argument that conventional Marxist e

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The Enchanted World

During this seminal publication, Alain Lipietz, one in all France's such a lot extraordinary Marxist economists, explores the position of cash and credits within the reasons of the Eighties international stoop. Lipietz provides a cogent and convincing argument that conventional Marxist e

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This is an index that shows how the price of a (hypothetical) basket of goods and services (called the market basket) changes over time. Another point to bear in mind is that not all price rises are inflationary. For example, prices may rise because of the imposition of new taxes or rising tax rates. Yet another observation is that inflation refers to a “sustained” or long-term rise in the general price level, not a one-off increase resulting, say, from a temporary bad harvest or a one-off hike in the price of crude oil.

1. The Inflation Rate The inflation rate is a measure of the pace of inflation, the speed at which prices rise. It is the period-to-period percentage change in the general price level measured as a price index. If the general price level rises between two points in time, t − 1 and t, from Pt−1 to Pt , the inflation rate, π, is calculated as π = 100 × Pt − Pt−1 . 1) An important point to bear in mind here is that the inflation rate, unlike the price level, is not observable at a point in time. It is a measure of what happens between two points in time (last year and this year, for example).

Hence, real income at t − 1 and t is Yt−1 /Pt−1 and Yt /Pt , respectively. Let the growth rates of nominal and real incomes be gN and gR , respectively. 6) Yt /Pt Yt /Yt−1 = . 7) 1 + gN = 1 + gR = Under inflation Pt > Pt−1 , hence, gN > gR . Inflation occurs when nominal income grows faster than real income. In Fig. 2, we show simulated data describing the time paths of nominal income and real income under inflation rates ranging between 1% and 5%. As we can see, the higher the inflation rate, the lower is the growth rate of real income.

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