last lrcture part 1

Final Exam Preparation

Final Exam Date and Time: Thursday night, next week at 6 PM in the classroom.
Last Assignment: Only one assignment is left; students are encouraged to complete it tonight and not wait for the weekend.
Office Hours: Last official office hours were this morning, but there will be additional hours on Friday and next Monday. Details will be posted on Canvas.
Tutoring Lab: Available only through this Friday, two days left for assistance.
Reflection on the Course: Acknowledgement of the bittersweet feelings regarding the end of the semester, encouraging students to reflect positively.

Expected vs. Unexpected Inflation: Understanding the costs associated with inflation based on whether it is anticipated or not is crucial for the exam prep.
Inflation and Wages:
- When inflation is perfectly anticipated (e.g., expected to rise by 4%), nominal wages typically increase to compensate, leaving real wages unchanged.
- If inflation catches people by surprise, it has different implications for costs, creating winners and losers in the economy.
Top Hat Question Insights: Emphasis on understanding which inflation costs are related to anticipated vs unexpected inflation; practice is beneficial for final exam preparations.

Nominal vs. Real Values:
- Real wages and interest rates remain unaffected if inflation is predictable as both nominal wages and prices rise proportionately.
- Gains and losses from inflation depend on whether it is anticipated or unexpected, causing wealth transfers between borrowers and lenders.
Student Loan Example:
- A student takes a loan at a fixed nominal interest rate; when inflation is higher than expected, repayment becomes easier because nominal earnings increase while the value of the debt decreases.
- Contrastingly, unexpectedly low inflation increases the real burden of debt for borrowers.

Arbitrary Redistribution of Wealth:
- High unexpected inflation redistributes wealth from lenders to borrowers. It highlights the disparities created based on inflation outcomes.
- Students are encouraged to understand the implications of potential inflation scenarios on debt repayment and overall economic impact.
Deflation:
- Deflation increases the real burden of debt and leads to reduced consumption and investment as borrowers minimize risk with falling prices.
- Historical context provided on how deflation has been problematic in economic downturns, notably during the Great Depression.

Theory of Inflating Away Debt:
- Inflation can be utilized to decrease the real value of public debt, but excess inflation can lead to economic risks, likened to a wildfire effect.
- Historical context indicates potential outcomes of inflation strategies used post-World War II, notably in the US.

Exam Structure: 50 questions total - including 14 from previous two exams and 36 from new material covering chapters 13-16.
Practice Resources: Weekly quizzes emphasized as crucial study tools; understanding their importance can impact exam performance significantly.

Last Days of Class: With only one class session remaining, there's an emphasis on reflecting on learning materials, asking questions, and preparing for the final effectively.
Encouragement: Students are urged to review and stay proactive in their studies, particularly engaging with practice quizzes and highlights from class discussions.