This chapter discusses inflation, unemployment, and stabilization. It begins with the example of hyperinflation in Zimbabwe in the late 2000s, and provides other real world examples. It talks about the role of a central bank in balancing the economy through fixed and flexible exchange rate practices. Professor Larraín also talks about the relationship between inflation and fiscal deficit. He also talks about seigniorage, inflation tax, the Olivera-Tanzi Effect, and other concepts.
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