... of money to achieve inflation results, this was not very successful with inflation both high and erratic. This was due to both the difficulty of the method (i.e. it is hard to define the velocity of money) and the credibility of the government of achieving lower inflation. When the Government is in charge of obtaining low inflation it is not always credible, this is due to the preferences of a Government. The best way to show this is as a simple game. We will assume that the Government chooses inflation and the private sector obviously set the expected rate of inflation. Looking at preferences the Government firstly prefer a low level of unemployment, and then the next preference is a low level of inflation. The private sector do not care if inflation is high or if it is low, only that its expected inflation is equal to actual inflation (so it ...

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