Don’t forget – you will increase your wage claims in order to account for the increase in prices. However, that will increase firms costs which will lead to further increases in prices. but then you will increase your wage claims to take account the increase in prices. Which will lead to an increase in prices. Which will lead to an increase in wages.

There is actually an argument out there that tax cuts lower inflationary pressures during a wage price spiral by lowering peoples urge to demand wage increases – as their real income has already gone up with the tax cut. I don’t buy it, but who knows!

Can’t wait for the “higher future” income Merton has promised me to kick in so I can relax that budget constraint:)”

Amen to that.

Can’t wait for the “higher future” income Merton has promised me to kick in so I can relax that budget constraint:)

You knew the government was running unsustainable surpluses and so you must get a tax cut (or else you at least knew you were getting a tax cut when they announced it). As a result, you will smooth consumption by borrowing before the tax cut arrives and then using the tax cut to pay back debt once it turns up.

As a result, you only changed your consumption behaviour because you were credit constrained, or bounded rational in your consumption choices (like everyone 🙂 ) – which one was it?

So i guess budget constrained?

how would bounded rationality stop me from buying expensive sandwhiches? something like “I know I would enjoy it but choose not to buy it?”

Ricardian equivalence, excellent.

http://www.labour08.co.nz/calculator/”

Super duper – post updated