Does Rounding Prices Create Inflation and Impact the Economy?

[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?

 

[Integral]

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.

 

[Dave]

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.

 

[Ivan Seeking]

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.

 

[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.

 

[Integral]

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 ?

 

[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...