A 1-shot increase in the money supply collectsseigniorage without increasing the inflation tax. It's like a lump-sum tax. The lower people expect the inflation tax to be, thegreater the value of real balances. Laffercurve may leave you to the right of the maximum of the long-run Laffercurve. F. Hyperinflation greatly reduces real balancesheld.
Disinflation leads people toreturn to normal levels of real balance holdings.
The Unpleasant MonetaristArithmetic A. Models like King and Plosser emphasize theendogeneity of the money-multiplier. A very different perspective is to view the monetary base as itselfendogenous - though in a very different sense. Not endogenous from the point of view of the government as a whole, butendogenous from the point of view of a single agency - namely, the monetaryauthority. C. Suppose the Fed chooses a fixed money growth rule -then its choices are even more tightly constrained. The Central Bank as Bureaucracy A. PC view of bureaucracies as constrainedbudget-maximizers can be extended to central banks.