ABSTRACT
The assumption of ‘steady' inflation has proven to be a common starting point for most welfare analysis of inflation. As defined, steady inflation has three basic properties
it is perfectly foreseen, so that the expected inflation rate, which alone influences behaviour, is in fact the inflation rate actually realised;
market institutions adjust sufficiently to accommodate the inflation; one example of such an adjustment would be the use of price-indexed contracts; other examples will be given below;
the effects of inflation are uniform over all commodity groups; that is, inflation causes no changes in relative prices.
