1a. According to Nobel laurate Milton Friedman, Inflation is an old, old disease.

We have had thousands of years of experience of it. There is nothing simpler

than stopping an inflation from the technical point of view.
If inflation were a disease, then what is the cause of the disease? How do you
cure the disease? What are the effects of this disease? Please watch the
following videos by Milton Friedman to answer the above questions.
https://www.youtube.com/watch?v=THAaIZmxfNA and
https://www.youtube.com/watch?v=jE7zxo61Xc8
1b. Policymakers in the 1970s saw that inflation was costly, but failed to grasp
that to get inflation under control, they needed to use monetary policy, and only
needed to use monetary policy. The fact that todays policymakers do
understand this reflects the profound impact of Milton Friedman on monetary
economics. Do you agree with the broad statement that only monetary policy
can cure inflation? Explain.
http://www.investopedia.com/ask/answers/122214/how-does-monetary-policyinfluence-inflation.asp
Floating vs Fixed exchange rates:
http://www.investopedia.com/articles/03/020603.asp
Exchange rate, fixed or floating (India)
http://www.thehindubusinessline.com/portfolio/macro-view/exchange-rate-fixedor-floating/article3588893.ece
What is Marxism:
https://www.nyu.edu/projects/ollman/docs/what_is_marxism.php

-----------------------xxxxxxxx------------------------------xxxxxxxx----------------------xxxxxxx----------------------

Milton Friedman believes that there has been a lot of factors that have been
associated with inflation such as it being a communist and a capitalist
propaganda, such as Yugoslavia having very high rates of inflation, as compared
to Switzerland which has a very controlled level of inflation. However that
doesnt mean that a capitalist nation isnt associated with inflation, as in the
case of Great Britain and Italy. He states the real factor for tracking inflation is
the monetary phenomenon He goes on to show that correlation through a series
of graphs showing the change of the price index or inflation with respect to the
quantity of money per unit of output. In cases of Great Britain, inflation was
associated with the trade unions, which tends to pull up inflation rates, as
explained by the Phillip curve. However when compared with the charts of Brazil
and Japan, they have high inflation rates inspire of the lack of influence of the
trade unions.
Why is quantity of money is directly associated with output. Many years back, it
could be associated with discovery of gold or other precious material. Egs are

California and Australia discovered large quantities of gold, in 1850s, thus

pushing up inflation. However after ending the link to gold and having
government dominated money, we have more scientific factors for varying
inflation. Today we have inflation as government create large quantities of
money. Why do they do this? To have enough for government spending. So that
they people have more money to spend, but without increasing taxes. But the
real money comes in from the taxes, so there cannot be a scenario where one
doesnt affect the other. Inflation is also a means of taxation. Printing money also
greatly affects inflation.
Compares notes with tax receipts from the government. Government gets
revenue in the form of inflation without having to vote for a level of inflation.
When your income increases 10%, the prices increase 10% but your disposable
income actually decreases. That is because youre in a higher income bracket
which means you end up with less money. So there is no actual tax cut but the
government giving back a fraction of your money. Explains how government debt
actually goes down, after the public buys government bonds because they end
up less money through the bond repayment that the actual value of the bond in
present terms.
Second factor was full employment.
Third factor for increased inflation, is mistaken policies of the federal bank.
Central bank always controlled the quantity of money and never in charge of the
interest rates.
Inflation is a world-wide phenomenon but not an international phenomenon. It is
produced by monetary policies within the country. Is increasing productivity the
solution for curbing inflation? Productivity also has very little say in the levels of
inflation. Stopping inflation is not the cure, as long as the government aims
growth there will be inflation. Inflation works a lot like alcoholism, the good
effects come first, with the government printing more money with more output
and more money supply but the bad effects come later with an increase in
inflation. When curing an alcoholic, its the other way around, the bad effects
come first, i.e. initial slowdown of inflation would slow down the economy
temporarily. Also many people also gain from inflation, mainly the federal
government and also home owners through mortgage loans.
The main implication of inflation in the publics eyes is that they want the buying
price to decrease and selling price to decrease which is not possible logically.
Gives the corollary to appendix operation to compare how unemployment is not
correlated to inflation. In fact there are words like stagflation and sumpflation to
prove that inflation is possible during a period of unemployment as well; its
more like a side effect of a cure for inflation.
Low output and unemployment are the only indications for low inflation? In the
long run there is no link between employment and inflation
This mainly happens due to a time lag between output (growth) and the rising
levels of inflation. Its not inflation that causes a stimulus but a sudden spike in
inflation rates. Like a country can be very comfortable with a fixed 10% inflation
YoY with income and taxes also increasing in parallel.

USA inflation really started in the 1950s during the Korean War and it had a
creeping inflation since then. The efforts of cutting down inflation during the
1960 meant cutting down government growth and output levels. John F Kennedy
bought things back to normal by bringing by inflation and since then USA has
been on a up and down journey of inflation. But each peak was higher than the
earlier peak and each trough lower than the earlier trough. For USA whenever
inflation seems to be recovering the government has gone ahead and printed
more money and has led to even more inflation. Slow growth rate has prompted
the people of the US and in turn the government to push drastic growth and thus
pulling the inflation up again.