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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How can money have a value? [duplicate]

The value of money can be the value to produce it. It costs, say, 1, to produce 10 000 000, in the mean (coins and paper, though digital money costs virtually nothing). This is called the extrinsic ...
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US Reserve Currency Status Impact on Inflation

Since US dollar has global reserve currency status meaning that other countries need to keep a certain amount of US dollar as reserves. There's a narrative that being a reserve currency, if US prints ...
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Why is hyper inflation not a concern with huge rise in M2? [duplicate]

According to quantity theory of money, with velocity and production being relatively stable, we would expect the amount of inflation to be proportional to the amount of money circulating in the ...
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Does it make sense to talk about Bitcoin 'inflation' when little to no goods and services are listed in Bitcoin currency?

I think of inflation as a generalized increase in the price levels of a basket of goods and services. I should add that my understanding presumes that inflation should be measured in the same currency ...
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Does Russia have higher inflation than US and Canada? If so, why in this particular case does money supply increase doesn't lead to higher prices? [duplicate]

My understanding is that Russian inflation in recent years is considered to be running in the 5-6 % range, while US and Canada - in the 2-3% range (as measured by price increases/CPI). But I'd expect ...
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Having difficultly to understand two indices with regard to inflation

What are these terms "provisional headline inflation" and "imputed index" used to predict in terms of inflation?
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Data on inflation target on different countries around the world

Does someone know if there's a page, like a "global bank" online page, where one could see the inflation target for different countries? For example, in x country, for x' year, the inflation ...
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What was the annual real growth rate in the US from 2010 to 2015?

If we look at the US M0 money supply after the global financial crisis (GFC): we see that it doubled from 2010 to 2015. If we look at the Consumer Price Index in the same period: it rose by 8%. So ...
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Is modern monetary theory sustainable?

I am looking around at a lot of the central banks around the world (primarily ECB, Fed, and BOJ) and they all seem to be simply printing their way out of any issues with their economies. As far as I ...
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Can inflation show up in assets without necessarily being reflected in classic inflation indexes?

I have been having an argument with a friend of mine who obtained an economics degree in college. I have been arguing that increased money supply from the fed has led to inflation in asset prices, ...
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Classical Theory of Inflation - Money Supply, Money Demand and Prices

In every textbook, website I read when talking about the classical theory of inflation, I see the diagram below which depicts the value of money, prices etc. This one below is from Spark notes (https:...
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Why high levels of inflation doesn't leads to high levels of employment?

According to the original Phillips curve $\pi=(\mu+z)-u$ there's a negative relation between inflation and unemployment. That being said, if there were a really high level of inflation, then there ...
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Why in the quantitative equation: $MV=PY$, $V$ and $Y$ can be taken as fixed?

To equation is \begin{align} MV=PY \end{align} where $V=\frac{1}{k}$. Why $V$ and $Y$ can be taken as fixed or constant? Why can $V=\frac{1}{k}$ too? Thanks in advance
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Why does central banks lowering interest rate incentivize more borrowing?

I'm a layman trying to understand how the US monetary system works. I'm particularly interested in how the Federal Reserve can create inflation without printing new dollars and putting them in M1. My ...
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Deriving the New Keynesian Phillips Curve (NKPC)

I have a question regarding the NKPC. I would like to know if it is possible to derive the NKPC from a sticky prices model, without making assumptions regarding the production function firms face. I ...
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From the aggregate supply equation to the definition of inflation rate

By definition the inflation rate is $$\pi=\dfrac{P-P_{-1}}{P_{-1}}\cdot100\%$$ or could be defined in terms of the consumer price index CPI, but in this case I think the former is the one to consider....
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Why does the inflation not follow the money supply?

To my understanding classical economic theory tells us that inflation occurs when the money supply is increased faster than the economic growth. Lately there has been a sharp rise in the rate of money ...
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If I fill a vending machine with \$0.50 sodas and sell them for \$1, am I creating 50 cents of wealth for the economy?

This is a very simplified example. If I fill a vending machine with sodas that cost \$0.50 each and someone comes along and pays \$1 for it, am I creating an extra \$0.50 of wealth for the economy? ...
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rebasing an index with inconsistent ratios between old and new data points?

I have a question about rebasing indices, hoping someone might be able to help. I'm working with two sets of index data for residential property prices from the Australian Bureau of Statistics. the ...
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diverging price indicators

Suppose that PPI is increasing while CPI is decreasing. interpereting this is somewhat tricky because different contexts are at play: CPI is largely domestic driven while PPI has global determinants. ...
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Why isn't high inflation along with robust welfare a 'good' system?

High inflation, by definition, means that the demand for goods and services is higher compared to the demand for currency. In other words, people are more willing to give up currency for goods and ...
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Is there a book or notes that explain all about inflation? [closed]

Is there a book or notes or papers (but for easy understanding please) that explain all about inflation? Not at a research level but student level. From what is previously needed to define and ...
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What exactly is “quantity of money per unit of output”?

When making the case about inflation being monetary phenomena, Milton Friedman shows a graph where "quantity of money per unit of output" move together with CPI. What is "quantity of ...
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How is the differential definition of money supply, velocity, and GDP defined?

I was reading: This article on money velocity (see the summary section) Where two formulas are presented: first an equality: $$\text{Quantity of Money} (M) \times \text{Velocity of Money} (V) = \...
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Calculate average annual inflation

The price index in the year 1993 is 60. The base at 2012 is 100. The annual nominal interest rate between 1993 and 2012 is 66% on average. What is the average annual inflation between 1993 and 2012? I ...
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Why if the economy will produces too much there will be an increase of prices in nearly all goods and services?

I am taking an online Economics course and not understanding why if the economy will produces too much there will be an increase of prices in nearly all goods and services? If for example there will ...
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Meaning of high bond yields [duplicate]

Lately, rising longer-maturity bond yields have been in the news. Many people write as though the rising yields show that "the market" believes that the Federal Reserve will raise interest ...
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Price level calculation

I am currently reading Dying of Money by Jens O. Parsson and he criticizes the way price level is calculated. Basically he tries to make a case that since money are not only used to purchase goods but ...
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Is it feasible for another country to attack the US dollar via counterfeiting? [duplicate]

Assuming, for the sake of the question, that a well-resourced adversary (another country, most likely) had the means and motive to conduct economic warfare against the United States through large-...
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Will printing more money during COVID cause hyperinflation?

When COVID started, many countries started printing loads of money and handing it out to their people. Here are some examples US is printing money to help save the economy from the COVID-19 crisis We’...
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What is the resolution down to which the annual inflation value can be controlled?

Judging by previous posts in the site, the inflation target is set annually to 2% by the Federal Reserve. Regardless of the reasons behind this choice, I am curious to understand how precisely can the ...
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Does Modern Monetary Theory (MMT) provide a useful insight into how to manage the economy?

According to advocates of MMT, the primary risk once the economy reaches full employment is inflation, which can be addressed by gathering taxes to reduce the spending capacity of the private sector. ...
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Creating a pragmatic, useable (not theory heavy) proxy for a currency basket for a set of economies

This is currently, a gedanken experiment, but may well form the basis of a whitepaper - or better still, an actual project. I am trying to come up with a practical way of creating a "currency ...
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What is the difference between “borrowing” money and “printing” money?

When a country's government has a budget shortfall, that country has to find some way to pay its contractors/emplooyees. Unlike a normal company, the government can't simply go to the bank and ask to ...
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Why don't Governments do away with the optics of taking on debt against new currency, and instead issue a limited currency every year (say 5% of GDP)?

Governments engage in the optical illusion of taking on debt against issued currency. The debt is effectively owed by the Government to itself. The value of the debt is completely controlled and ...
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Oliver Hart said that financing deficits by printing money can lead to hyperinflation “once the economy is close to full capacity”. What does he mean?

In response to a poll on Modern Monetary Theory, Nobel Laureate Oliver Hart said that Governments financing deficits by printing more money "can quickly lead to inflation or even hyperinflation ...
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For stability, is there a limit to the sovereign debt that a Government owes to itself against issued fiat currency?

Looking beyond the optical illusion of Governments owing debt to Central Banks, Governments effectively owe themselves the sovereign debt created against issued fiat currency. By definition, there ...
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Why should prices come down (in theory) in an educated society with a well-run government?

In Chapter 1 of Robert Kiyosaki's "Rich Dad, Poor Dad", the rich dad says: "In an educated society with a well-run government, prices should actually come down". Is there any ...
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Is there an alternative to currency to facilitate exchange of goods and services?

Say I have collected a bunch of seashells. Tom wants to have my seashells. Therefore the seashells have value and I have just created wealth. And so Tom buys my seashells for \$10. But even though I ...
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Are government bonds ever profitable

With most government bonds having interest rates being rather low, (0.254%) This being a whole 1.75% below target inflation (To clarify all rates are UK rates, and UK target inflation is 2%), and 1.54%...
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Lucas' islands model and a firm's profits

I was doing some reading on Lucas' islands model and how aggregate supply can change depending on agent's expectations regarding monetary policy. It's always assumed that there are "n" ...
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What is the point of monetary policy if most monetary variables are determined by non-monetary factors?

Monetary policy today is largely focused on setting interest rates in order to reach an inflation target / value of the currency. Interest rates are used to affect inflation by changing the demand and ...
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New Keynesian Phillips curve with time-varying elasticity of demand

I am looking for a paper or notes which derive the New Keynesian Phillips curve with Calvo price staggering and time-varying elasticity of demand (i.e. markup shocks). Specifically, I am trying to ...
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What would happen in a modern economy if growth plateaus?

According to a Wikipedia article on a United Nations report, The UN Population Division report of 2019 projects world population to continue growing, although at a steadily decreasing rate, and to ...
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Does real GDP control for changing preferences?

This claims that real gdp does not account for changing preferences. However, if preferences were to change for sneakers and subsequently pushes the price up, won't this be reflected in the changed ...
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How do you stop Hyperinflation in a Nation?

In history, I learned that the Weimar Republic had hyperinflation as a consequence of leading and striving war during World War I and placed a new currency named German Rentenmark which would be about ...
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Can printing money with simultaneous government intervention to increase supply prevent inflation?

Just as above...If we print money and simultaneously introduce some sort of government intervention in order to increase supply/ production, then supply and demand would be 'balanced' and therefore ...
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Would a Federal Job Guarantee hurt the economy?

I've been reading about how a job creation program would disrupt the private sector. One of the main things I kept seeing was that the a FJG will result in the elimination of thousands of jobs. So, ...
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Intuition for effect of interest rate changes in New Keynesian model

I am trying to understand the intuition behind the effect of an interest rate change in a simple New Keynesian model (or really in any sticky price model). As a simple example, I take (roughly) the ...
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CPI dataset from BLS

I hope this question is not inconvenient for any of you, so I would appreciate if you do not mark it as not useful. I want to work with the data of the CPI from the BLS (I am not American, and this is ...

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