What would happen in the economy if

[WhoWee]

Now you're REALLY off into never-never land.

I find all your optimism admirable, but totally unrealistic. You and I are just talking past each other, partially I think because we see the world quite differently, and it's clearly pointless to continue since we're not going to convince each other.

Cheers ...

Given the far-fetched topic of the thread - it seemed all possibilities should be considered.

 

[BWV]

why speculate - look at history. Hyperinflations in Germany, Brazil, Zimbabwe etc give you an idea what would happen

 

[WhoWee]

why speculate - look at history. Hyperinflations in Germany, Brazil, Zimbabwe etc give you an idea what would happen

Of course - but that wasn't caused by giving everyone in the world $1Billion each.

 

[WhoWee]

I do have to wonder how fast some of the people would lose their $1Billion gambling?

 

[WhoWee]

because Income and gift taxes are rediculous and greedy. And other countries my have some sense of the poor and middle class. Where America doesn't care.

Can you clarify your meaning a bit?

 

[Pyrrhus]

I think most of you gave the correct answer. If everyone income is shifted up by some constant then economic theory says that prices must change as demand will change. In economics, prices are the outcome of the Walrasian Equilibrium (demand must equal supply), and thus the prices will adjust to guarantee this result. This is the statics of the problem.

The question becomes with regard to the dynamics of the problem how will the markets adjust to reach this stable equilibrium point. However, that requires knowledge of the organization of the market, and such. It might take several years to achieve the new equilibrium point, but there's no guarantee of stability as the problem stated do not give any details.