Re: Economics: Removing Zeros from Currency Causes Inflation?
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My guess would be that businesses are more likely to round their prices up to the nearest unit than down. Like if they get rid of the penny and have to round to the nickel, things that cost $1.77 will go up to $1.80.
It probably doesn't matter much to the average consumer. The only place it matters is in a large market, where large numbers of very small shares are being purchased. Fortunately in these situations we treat dollars and cents as indefinately divisible and just round to the nearest unit upon completion of the total sum of transactions. Happens with gas too, notice how gas stations charge you weird prices like $1.97 9/10?
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This does make sense and probably contributes to at least some of it but I think that he was talking about something on a greater scale then just this. At least an order of magnitude or more.
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