The second direction, re-distributive considerations, investigates an aspect that was often neglected in welfare studies of inflation in the past. A positive inflation rate implies a transfer of wealth that may have important real effects, a fact that we have observed in infamous episodes of the past – the Great Inflation, for example – and which squares with our intuition.
In an environment of high inflation, the reduction in the real value of nominal debt obligations may very well act as a deterrent for lenders to supply credit as a matter of regularity. The third direction adds money and financial choices to the set of variables that are considered in the optimising analysis.