Does Rounding Prices Create Inflation and Impact the Economy?

  • Thread starter Mattius_
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In summary: Originally posted by Mattius_ 0 would be an exact and correct measurement... I am not counting 10 either because it would also be exact. neither 0 nor 10 need rounding...
  • #1
Mattius_
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when a price of $56.795 is rounded to $56.80 money is created... would you say this has a negligable impact upon our economy?
 
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  • #2
Urban Legend has it that one of the first programers to write code for a bank decided to have the program deposit all of those rounded off fractions of a cent into his personal account. Frist he was rich then he was in jail.


I am not sure how it could have an effect on the economy, after all it is not "created" money it is simply accurate book keeping.
 
  • #3
Originally posted by Mattius_
when a price of $56.795 is rounded to $56.80 money is created... would you say this has a negligable impact upon our economy?

Yes, because just as many round ups occour as round downs.
 
  • #4
A friend of mine is really into economics. He was telling me that when computer systems started providing virtually immediate updates to banking transactions, hundreds of billions of dollars simply disappeared from the US economy. I have no idea to what extent this affected the world economy. This was not due to round off; it was due to dwell time. When the world ran on paper, a tremendous amount of false wealth existed due to debt that was floating - much like floating a check. The delay of days or even weeks became a standard. The money people knew how to use this to their advantage.
 
  • #5
no, there arent as many round ups as there are round downs... there are 4 decimals to round down to, there are 5 to round up to.
 
  • #6
Originally posted by Mattius_
no, there arent as many round ups as there are round downs... there are 4 decimals to round down to, there are 5 to round up to.

Try again.
0-4 5 round down
5-9 5 round up

Or are you not counting anything between .0xx and .1xx ?
 
  • #7
0 would be an exact and correct measurement... I am not counting 10 either because it would also be exact. neither 0 nor 10 need rounding...
 

1. What is inflation caused by rounding?

Inflation caused by rounding is a phenomenon where the prices of goods and services increase due to rounding up of prices. This can happen when businesses round up their prices to the nearest whole number or when the government rounds up taxes or fees.

2. How does inflation caused by rounding affect the economy?

Inflation caused by rounding can lead to an increase in the overall price level in the economy, making goods and services more expensive. This can decrease the purchasing power of consumers and lead to a decrease in consumer spending, which can slow down economic growth.

3. Is inflation caused by rounding a common occurrence?

Yes, inflation caused by rounding is a common occurrence in many economies. It can happen due to various reasons, such as rounding up of prices by businesses, rounding up of taxes and fees by the government, and rounding up of interest rates by financial institutions.

4. Can inflation caused by rounding be controlled?

Inflation caused by rounding can be controlled to some extent by implementing policies that aim to keep prices stable and prevent excessive rounding. This can include measures such as monitoring price changes, regulating pricing practices of businesses, and controlling inflation through monetary and fiscal policies.

5. How can individuals protect themselves from the effects of inflation caused by rounding?

Individuals can protect themselves from the effects of inflation caused by rounding by being aware of price changes and making informed purchasing decisions. They can also diversify their investments to minimize the impact of inflation on their savings. Additionally, individuals can advocate for better pricing practices and policies that aim to reduce inflation caused by rounding.

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