No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Twelve: Money Mischief 276 DESIRED LEARNING OBJECTIVES At the conclusion of this chapter, the student should be able to... § § Define the monetary base and its components § § Describe how the value of money (in terms of purchasing power) is determined by supply and demand § § Compare and contrast the definition of inflation today to its definition in the past § § Explain why using the consumer price index as a proxy for inflation is misleading § § Define asset inflation and explain why it is worse than consumer price inflation § § List the tools of the Fed and explain why open market operations are preferred § § Define time preference § § Explain the difference between nominal and real interest rates § § Summarize the implications of heterogeneous capital for monetary policy § § Outline the debate over rules vs. discretion