Hyperinflation as a Tax. Explain why hyperinflation can be viewed as a tax? Is it a good tax? Economists say that people suffer from money illusion if their behavior is influenced by nominal changes...

Hyperinflation as a Tax. Explain why hyperinflation can be viewed as a tax? Is it a good tax? Economists say that people suffer from money illusion if their behavior is influenced by nominal changes that are also not real changes. Consider the following scenarios and be prepared to discuss them in class.

a. Erin bought an antique clock for $100. Two years later, Betsy bought an identical clock for $121. Meanwhile, there had been inflation each year of 10 percent. Both Erin and Betsy sold their clocks to other collectors. Erin sold hers for $130, and Betsy sold hers for $133. Who profited more from her transaction?

b. Bob and Pete are traders in classic comic books. A year ago, Bob and Pete each bought the same comic book for $10. Bob sold his a couple of days later for $20. Pete waited a year and sold his for $21. If inflation last year was 6 percent, who made the better deal?