Questions tagged [inflation]

Inflation is generalized increase of prices of goods and services in an economy, along with a corresponding fall in the purchasing value of money. The rate of inflation refers to the increase of the price of goods and services over time.

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Why is there increased speculation that America might go into a recession ? If they do will the rest of the world also face downturn?

Recently there has been increasing speculation regarding USA going into recession (since rate hikes can cause recessions): https://www.washingtonpost.com/business/2022/05/19/recession-economy-markets/ ...
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Dealing with inflation [migrated]

Question about inflation and my idea about how to handle it. Electrical Engineer here,so please bear with me if I use non economics terminology. So as we see the prices are going up for everything. I ...
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Why has the Yen weakened despite lower inflation?

I have recently wondered about the depreciation of the Japanese Yen against the USD (or any other major currency). Currently, a thousand Yen is at around USD 7,75. This is about about a twenty-year ...
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In what ways will taxing corporations reduce inflation?

President Biden Tweeted to the effect that taxing corporations will reduce inflation. When I look at what goods are experiencing the most inflation it seems to be things like groceries and rent. What ...
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Savings = Investment. High interest rates stifle investment. High interest rate encourage savings. Isn't this a contradiction?

If savings = investment, then by definition, higher interest rates encourage savings and hence more investment. But when it comes to monetary policy, central banks increase interest rates in order to ...
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Unemployment only differs from its natural rate if expected inflation is different from actual inflation - why?

This is a quote from Mankiw. No further explaination is given and I'm having trouble working through the logic behind this statement. Could someone explain the process behind this assertion?
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Does high inflation in the UK and US have the same cause?

UK inflation has risen to 7%, the highest rate it has been for 30 years, and could reach 10% by the end of the year. But also The consumer price Index, which averages prices across America, rose by 8....
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How much of Australian inflation is demand driven or supply driven

For the aussies who have been keeping track with the current inflation rate at 5.1% we have seen the policy response by the RBA increasing the cash rate by 25 basis points so its now at 0.35%. This is ...
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Price level changes: accounting for new products

I'm looking for a method to integrate new products into the calculation of price level changes. Assume a market for a single good, all of which are substitutes. For all goods in the market, we know ...
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Is it smart to take a loan when you expect a rise in inflation?

Let's say you want to lend €10.000,00 from your bank. At the time you take this loan the price of a bread is €1,00. But you expect that there will be inflation. For the sake of the example, I will ...
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Is there a response to Stagflation that isn't austerity?

A reason why Keynesian economics got discredited and replaced by the now dominant Washington Consensus, was because of the 1970's stagflaysh according to David Harvey: https://newlearningonline.com/...
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How does US inflation impact dollarized nations?

For instance, would a high inflation rate on the US have any impact on countries that use the US dollar as their only legal tender, eg Ecuador or El Salvador? I often hear that high US inflation will ...
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Has the Fed fulfilled its mandate, as in is inflation less, unemployment lower and interest rates moderate than what it was before its formation?

I could find two papers and one set of graphs attempting to study inflation, inflation volatility pre-Fed v. post-Fed (and none assessing its performance on reducing unemployment): https://doi.org/10....
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Does raising rates lead to lower wages?

You sent https://www.cp24.com/news/bank-of-canada-raises-key-rate-half-a-point-to-1-and-warns-of-further-hikes-to-come-1.5859951 Since companies that make stuff rely mostly on credit to do that. Now ...
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Why does the wage-price spiral of inflation exist, why do high wages/high prices not balance out?

Today's NYTimes newsletter wrote the below Consider wages: If people expect high inflation, they will demand higher pay. But to pay higher wages, employers are likely to pass that cost to consumers ...
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Where is all the cash in an economy where saving is high?

Where is all the cash in an economy where saving is high, today inflation in Argentina hit a monthly rate for march of ~7.6%, what this means for me is that I try to move away from the peso as soon as ...
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When wages aren't keeping up with prices, where does the money go?

Is it the case that quantity sold is going down, such that revenues are growing only as fast as wages? Or would that be ruled out since the national income is going up even when adjusted for inflation?...
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Money supply vs inflation - repository of raw data?

I would like to do may own analysis of the relationship between the money supply and inflation. Can anyone suggest a good source for raw data? I would like to have access to data for multiple ...
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How effective are economic sanctions on Russia?

Things like "banning Russia from SWIFT" sound devastating, but then we find out that actually it is a ban on some (not all) Russian banks. So, do the sanctions imposed by the West and the ...
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What are the reasons for Russian Ruble to strengthen in the past few days?

1 USD was about 75 Russian Rubles before the war in Ukraine began. After the sanctions, Russian Ruble quickly declined and 1 USD skyrocketed to 139 Rubles. Now it is back to around 85. What are the ...
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Solution Check on Problem about expected inflation and Philips Curve relation (from Blanchard's Macroeconomics book)

Consider a country with two political parties, Democrats and Republicans. Democrats care more about unemployment than Republicans, and Republicans care more about inflation than Democrats. When ...
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Is the "10-Year Breakeven Inflation Rate" useful?

I am confused by the "10-Year Breakeven Inflation Rate" derived by the Fed. The Federal Reserve Bank of St. Louis maintains a chart at https://fred.stlouisfed.org/series/T10YIE which is ...
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Price increase at stores

I got an economics question. Electrical Engineer here, who is just trying to understand economics, demand, inflation etc. I was at a store the other day and noticed that the Taco sauce I buy always is ...
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How will inflation affect foreclosure rates?

I should preface this by saying that I am not really familiar with or educated in economics. I have a hypothesis however, and I would like to know if there is research out there that supports or ...
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If interest rates rise, the cost of paying off existing debt for companies will increase, won't this be inflationary?

I am fully aware of the standard logic that interest rate rises lower inflation by slowing investment. However, isn't it the case that any debt that companies have becomes a larger cost and hence puts ...
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Why there was inflation before Nixon shock in august 1971 in the US?

As far as I know before August 1971 the US dollar and gold were convertable. Means that every US dollar was backed by some fix amount of gold in the US treasury or central bank (I don't know exactly). ...
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Bernankee, Okun's law and Sacrifice ratio

I have a question related to numerical problem 1 of chapter 12 of Bernankee's book in Macroeconomics Consider the case of an economy in long-run equilibrium with an inflation rate, π, of 12 percent (0....
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If current inflation is (probably) not due to corporate pricing power, then why are profit margins currently so high?

A recent IGM Forum at Chicago Booth survey of economists indicated that few economists think that corporate pricing power is behind current inflation. More specifically, only 7% agreed and 65% ...
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Correct formula for real GDP growth?

I have nominal GDP growth (%) and inflation (CPI price level growth, %). Which is the correct way to find real GDP growth (%)? =((1+[nominal GDP growth%])/(1+[inflation%]))-1 or simply: =[nominal GDP ...
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If someone from another country mines and sells cryptocurrency to an American for US Dollars what happens to the US money supply?

I would imagine this would act like a trade deficit and the money supply would go down. If I'm correct there, how does the Fed track these random depletions from the money supply? If they are ...
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National consumption regression with inflation and interest rate controls

I'm trying to test the relationship (only in cross-section - not with time series data) between national consumption and the fragile state index and my project advisor suggested I include inflation ...
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Will the freezing of Russia's foreign exchange reserves force China to decrease its massive Western currency reserves?

China has build up a massive foreign exchange reserve (excluding gold) of 3.2 trillion USD (FRED, Nov 2021). By the end of 2014, 58% of this were held in US dollars, according China's State ...
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Why did Allied countries not freeze German and Japanese central bank assets in WWII?

Supposedly such an action would cause massive turmoil in their domestic markets, cause exchange rates to rise, inflation to rise, and thus prevent them from engaging in meaningful trade. Why did ...
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Are low rates a subsidy to banks?

Axel Leijonhfvud (Professor Emeritus, Department of Economics, UCLA) wrote in 2011: The Fed is supplying the banks with reserves at a near-zero rate. Not much results in bank lending to business, but ...
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How does inflation erode away debt in a practical sense?

Intuitively it makes sense that if inflation is above nominal interest rates, businesses/central banks can erode away their debt. I wanted to understand how it would work practically such as in some ...
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Why does interest rate differential affect capital flow in equities?

With the recent news of US fed hikes, there are emerging markets where central banks have decided not to raise rates, like in India, Indonesia, China, etc. The common theme I read everywhere is this - ...
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How much money is, on average, "on loan" from the Fed?

The Fed maintains its target interest rates by "lending" money to commercial banks: When the actual federal funds rate is higher than the target, the Federal Reserve Bank of New York will ...
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Best Way to Report Annual Rate of Inflation: Average of Monthly Year-Over-Year or End of Period?

I am working on putting together a presentation on recent economic activity, and I am not sure what is the best way to represent inflation at an annual level. I pulled the CPI All Items All Urban data ...
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What are the standard models of monetary theory?

I am currently conducting research on a digital economy which has recently faced inflation issues and thus implemented monetary policy to tackle them. My paper seeks to compare how real life digital ...
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Are there presently any countries seeing high inflation whose central banks did not greatly expand the money supply during the pandemic?

Often the recent spike in inflation is attributed to kinks in supply chains. My question is basically are there countries with high inflation where we can rule out that it is primarily caused by ...
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Why is zero or negative inflation such a bad thing [duplicate]

Wikipedia states that inflation rate is In economics, inflation refers to a general progressive increase in prices of goods and services in an economy.[1] When the general price level rises, each ...
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Data on historical, cross-country nominal and real yield curves

Various central banks publish their fitted nominal yield curve estimates: the Fed, BOE, SNB, BOC, ECB (cf: Bundesbank), RBA, Russia, RBI. (I couldn't find for BOJ; Brazil; BOK; or PBOC. Links for ...
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Did Biden's stimulus packages cause inflation in the US?

Can we state with high confidence that Biden's stimulus packages were indeed a major factor in the spiraling (or, at least, pretty high) inflation in the US? Did Biden go over the top with it after ...
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Difference between two different ways of adjusting for inflation daily given annual rate

This is a follow up question to this I found two different ways to "adjust for inflation" on a daily basis given an annual rate (without doing daily compounding). Both yield the same result ...
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Inflation adjustment different than halving

I am developing a "inflation adjustment" web app where an initial capital is adjusted based on some optimistic, realistic and pesimistic estimates using Monte Carlo Simulation. The code is ...
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If no one knew about inflation, would inflation take place?

I’m not an economist and would like some insight into this thought experiment. If people, the news, social media, etc. suddenly stopped talking about inflation, would inflation still take place? ...
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Simple description of how interest impacts inflation

I always was taught that inflation is impacted by interest like so: Lower interest rate => Loaning money is cheaper => More money in the system => Higher inflation However recently I am ...
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Who controls money supply if the fed does not?

This whitepaper states (bold mine): According to the consensus view, the two leading culprits of inflation risk today are the fiscal deficit and the money supply. To illustrate, take this CNBC ...
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What is the rationale for setting a 2% target rate for inflation

I have what I think is a simple question, but just like 'how do you balance a checkbook' they don't teach it in school. The only similar question I found was this: Is there any scientific proof that 2%...
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Comparison of Inflation rate of particular product with world inflation rate

To check the price reasonableness of the purchased product by Procurement manager, I aim to compare the monthly inflation rate of purchased product with world inflation rate of that product and ...
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