Concepts: Inflation, deflation, CPI, real price, exchange rate, purchasing power parity, Balassa-Samuelson effect.
Background: In Sacred Games, we follow Gaitonde’s path to organized crimes through the mid-1980s. We witness his life at the end of Indira Gandhi’s state of emergency that lasted from 1975 to 1977. In 1977, Ganesh worked at an upscale restaurant, where a meal cost 12 rupees.
Question 1: First, define the terms’ inflation’ and ‘deflation,’ then find the inflation rates in India from 1974 to 1977. Did the economic situation improve during the state of emergency? You may use the values from the World Bank’s website to answer the question: https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=IN
Question 2 (Let’s Use Data): First, find the 1977 and this year’s values of the Indian consumer price index (CPI) to calculate the real price of the restaurant meal in 1977 (12 rupees). Second, use the current exchange rate to find the price equivalent in U.S. dollars. Compare this price with your favorite restaurant meal.
Background: Adriana and Segundo discuss the rising cost of renting their apartment and Segundo’s salary.
Question: Economists tend to consider money as neutral in the long run, and therefore that inflation will not affect real variables. However, the clip shows that Carlos’ family is struggling with rising prices. Using course concepts, explain why both money neutrality and Carlos’ family suffering from inflation are compatible.
Concepts: Quantity theory of money, monetary policy, inflation, hyperinflation
Background: In Parts 1 and 2, the robbers invaded the Royal Mint of Spain, taking hostage 67 individuals, with a plan to print and escape with 2.4 billion euros.
Question 1: What are the unintended consequences of running the money-printing press? Why can’t the European central bank print a massive amount of money to stimulate the economy?
Question 2 (Let’s Use Data): Can the professor’s 2.4 billion euros plan create inflation in Europe? Money Heist was released in May 2017. To answer this question, you may use the value of Money Supply M1 for the Eurozone from the FRED website. https://fred.stlouisfed.org/series/MANMM101EZM189S
