Econ 2 MWF 11:45
12 March 2007
Henrietta and Her Hyperinflation Hassle
“Welcome to Honeyville!” exclaimed the large freeway sign on the side of the bluff. Henrietta and her hairy cat were moving to Honeyville for her new job, which she had gladly accepted because she had had difficulty finding a suitable job. Honeyville was a city of bustling activity with thousands of people going about their business, working and spending as they pleased. Times had been good for the city with an excellent booming industry and successful financial district. Henrietta was thrilled to be starting a job at a renowned astronomical institute where she would be able to look at the stars and planets everyday. Fortunately, Henrietta was able to find an apartment that would house her and her cat, even though it was a bit more expensive than her previous apartment in the small town of Graham. However, she expected it to be more expensive than her town because of the higher prices in the city due to a higher population and more goods were produced.
She went to her first day of work at the astronomical institute and began immediately looking into the sky through the telescopes.
“What are those strange twinkling lights?” she asked herself, “I’ve never seen glowing green orbs amidst these flashing star formations,” very strange she thought. She ignored the stars which appeared to be strobe lights of the sky, and figured her brain was playing tricks on her. After leaving work that evening, she was suddenly overcome with an eerie feeling and she felt a cold chill envelope her. She heard a high pitched buzzing followed by a blinding flash of light and then her memory went blank.
She awoke sometime later, though she had no idea if she had been asleep for minutes or months. The surroundings were foreign to her and unlike anything she had ever see, then she heard an ethereal sound unfamiliar to her, but strangely understood what it was saying to her.
“Henrietta, we have brought you here to help us befriend your planet and your town. We saw you in your telescope and thought you would not judge us for who we are. We are the Xenbos from planet X and we wish to overthrow Honeyville and then eventually, the entire World. You shall help us make your people happy so they will like us. What do they love the most?? What do they steal the most?? What does everyone want??” questioned the strange voice.
Henrietta was terrified after these strange aliens told her they wanted her to help them overthrow her city and then potentially the world. She did not want to help them, but she feared for her life, so she thought she would try to help them as long as they didn’t succeed in overthrowing her city. She thought carefully about what she thought the people would like as a bribe from aliens; hmmm, not really something she contemplated everyday.
“Well, I guess if I was going to tell you the honest truth, everyone likes money. Money is the most coveted thing on earth and everyone always wants more. That will be the only way you might win the planet over,” explained Henrietta, still in disbelief at the current situation she was in.
The Xenbos thanked Henrietta for her time and told her she was very helpful to them. Henrietta thought she was having one of those realistic nightmares she occasionally had, yet she felt more awake now then she ever had in her life. The aliens assured her that she was a great help to them and had taken the necessary equipment to fulfill the peoples’ desires for riches.
Henrietta awoke some time later, yet she was back in her own apartment. Assuming she had just had a horrible dream, she tried to go about her day as normal as possible. While at work, she kept hearing of a severe weather warning heading toward their city. When the storm finally hit the city, a very peculiar phenomenon occurred.
“What is falling from the sky? Is that what I think it is?” cried all the workers. Yes money was falling from the sky. The town of Honeyville experienced an amazing sight where the sky was literally raining money! Normally Henrietta would have been just as excited as well as scared to death about random cash falling from the sky. But due to her previous experience, she realized that it all had to be real and that this strange type of precipitation had to be the aliens’ way of befriending the city.
The city started going crazy over the raining cash and people ran outside with buckets and suitcases, in order to see how much cash they could collect. It turned into a madhouse and people were getting hurt attempting to collect the cash because of everyone’s cut throat greed.
Eventually the beaming money stopped pouring from the sky and everyone was ecstatic about their new wads of cash.
Henrietta could not believe what had happened, but she did not want to miss out, so she gathered her share of money as well in an open pillowcase, running back and forth across the street trying to catch as much as possible.
“What an incredible phenomenon which occurred today folks. Government issued money fell from the sky and made everyone a bit wealthier. We are unsure of the causes as of this point; however the Government is not claiming responsibility. We believe several billion dollars were dropped in total. Well, either way, enjoy your new cash and go out and have some fun!” reported the local new anchor.
Henrietta began dreaming of all that she could buy now with her new amount of money. She decided to go on a shopping spree, however so did the rest of the city as well. When she entered her favorite clothing store at the mall, she picked up the dress she had been eyeing in the window for the past month. When she made her way to the crowded register, she got out the $100 that she had seen it advertised for in the window. However, she was shocked when the clerk rang up the dress and it cost $300! Henrietta was so shocked at this huge price increase; she asked the woman why it was so much more expensive.
“Honey, everyone has more money now. We are experiencing hyperinflation because of all the money we just received from the sky. There is more money supplied than people want, if you can believe that. With all the newly acquired money people have, they want to go and spend it quickly, like you going on a shopping spree. So there is more demand for the items people want to buy,” explained the clerk.
“Oh I had no idea that is what happens when extra money is injected into the economy,” exclaimed Henrietta.
“Yes well, my economics professor taught me all I need to know. You see, even though there was an increase in the demand for certain products because of all the new money, there however was not an increase in the supply of goods and services, so we have to charge more money for the same goods,” the clerk told Henrietta.
“But I don’t understand why it costs $300 now when it only cost $100 two days ago?” questioned a befuddled Henrietta.
“Well there is a lot more money in the economy now, so everyone wants to try and spend it as soon as possible. So we have to charge more money for items, and this increase in the price level makes each dollar worth less than before, and therefore it buys a smaller quantity of goods and services, sorry dear….so that will be $300 miss.”
Henrietta left the store with her expensive new dress, but figured everything would work itself out again soon. She wondered how the aliens were fairing and if they were succeeding in their attempt to take over the city and eventually the world. Oh well, she didn’t want to think about it. As she walked around the city in the next few weeks, she noticed prices going up everywhere. Gasoline was up to $100 per gallon and a loaf of bread cost $50 per loaf. Things were starting to get ridiculous with regards to the economy and prices. She also noticed a large number of signs for stores going out of business.
Henrietta wished she had taken an economics class so she could have known not to suggest to the aliens to give the people more money. In the end, the aliens failed at overthrowing Honeyville because the entire economy was in shambles and the people disliked the aliens for what they had done. Just goes to show the best way to receive more money is to earn it, and not to collect it from alien spaceships beaming it down from space.