juanaram

You are talking pretty much about the difference between nominal value and real value. Real value determines the value of things adjusted by inflation. Of course inflation (low inflation), as the money neutrality states, doesn't affect aggregate supply in the short run, but still it has a tremendous impact on investments as people deal with their expectations based upon their wage increases compared with inflation, and entreprenurs future yields, the cost of capital and real interest rates. They are all based upon inflation. Obviously in any country with high levels of inflation, hoarding physical assets such as tennis raquets could be a good way of avoiding losing your capital, but still you don't get paid with tennis raquets and investments yields are not based upon tennis raquets as far as i know.

his is true, and I would add that Mankiw is not a keynesian, but a libertarian. Still, his textbook is based on pure facts and not on political or ideological oriantations. He won't try to persuade which type of economic theory is better, not in the last. On the other hand, he pretty much justifies State intervention in certain cases las market failures as well as free market in other situations. It's just a great textbook

Greg Mankiw's "principles of economics" is one of the best textbooks for beginners.

Ok, let's put things in perspective. Inflation determines the expected yields on any investment. If you expect a 20% inflation rate, you know you will need a nominal interest rate above 20% for it to become profitable. It's essential to know the level of inflation for any investor willing to invest on any kind of utility. Secondly, the fact your savings are in terms of a mix of investments it doesnt mean you are inmune to inflation. If you have an annual yield of 5% on your savings, and inflation is 8% your yields will be -3% negative which means you are losing money. Inflations affects absolutely everything, from your purchasing power, to the level of investment, and the economy as a whole. On behalf of somebody that lives in a country with 20% annual rate of inflation and I can tell you it's one big deal for economic growth. Everything is measured in terms of it's nominal worth and inflation is the measure of how things lose it's value. It actually doesn't matter whether you carry cash or a bank credit, you always consume based on the nominal worth value.