If we stop circulating the penny (as discussed in this news story) we can expect merchants to round-up their prices. Yes, proponents claim otherwise, but history does not agree.
After the European Union, in its quest to crush all Europeans into identical gray boxes, replaced all the lovely individual currencies with one single Euro currency, it was commonplace for merchants in Euro area countries to round-up their prices across the board to retain “attractive” numbers such as .99 in their prices. Although it had only a minor effect across the board, this caused a decrease in consumer spending that put a slight damper on economic growth related to the introduction of the new currency.
Mark my words, despite claims, prices will increase slightly across the board, causing slight price inflation that will hit the “working class” average Joe. For example, if a product currently costs 2.91, expect it to go up to 2.95, not 2.90. So, don’t be like the EU, America. Let us keep our pennies.
Mr. Mankiw was until recently George W Bush’s chief economic advisor. He also wrote the textbook for my applied macroeconomics class, Macroeconomics, 5th ed.
I cannot help but consider Makiw’s positions while reading it. The textbook is actually great, well-written for the most part, concise, and easy to understand. But I can’t help but think that Mr. Mankiw is preaching “do as I say, not as I do”. That, or he needs to read his own book.
This is the same person whose report praised the trend of “outsourcing” of American jobs to foreign countries.
In the few mentions of the President I found in the textbook, one implies his tax cut was sound Keynesian economic policy, and another blames the current economic downturn on 9/11, but the book is pretty free of Fox-News-Syndrome (e.g. too much political commentary). I look forward to reading one of the textbook’s last chapters, which is exclusively about government debt.