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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Does combination of sticky prices and stagflation lead to redistribution of wealth?

Suppose there is inflation in our country, but some prices are sticky and there is non-positive "growth" of the real GDP. In other words, we experience stagflation. If I understand correctly, non-...
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Annual Fraud Recovery Over Time: Should I adjust for inflation?

I have a dataset of the total amount the U.S. Department of Justice obtained annually in settlements/judgments of government fraud cases from fiscal years 1988-2019. There's a lot of variation, but ...
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Alternative inflation metrics

I am looking for the most famous alternative inflation metrics used by some acknowledged economists other then CPI and PCE. In my opinion energy, food, education, healthcare, housing and transport ...
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Deflation equivalent of crack-up boom

A crack-up boom is the total depreciation of a currency resulting from both a continuous rise in its supply and a fall in its demand. Is it at least theoretically possible for such a process to exist ...
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Why will inflation raise sellers' purchasing power?

According to my textbook, in the chapter on inflation, "When a price rises, buyers of that good must pay more, but sellers get more revenue when they sell it. The loss in buyers' purchasing power is ...
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Calculating Real Budget Deficit, given Nominal Deficit and Inflation

I am doing this course on Coursera. In the context of explaining what Budget Deficits are, the professor puts up the following formula: Real Deficit = Nominal Deficit - (Inflation*Total Debt) My ...
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Why doesn't AD curve self-correct to higher price level in LR?

In textbooks it is usually taught that once actual price level is higher than expected, short-run aggregate supply will eventually shift up so that new expected price level is closer to the actual ...
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Are CPI stats weighed based on population size

Generally inflation and CPI are reported on a national level. If a country for example has 10 cities, after surveying prices in each individual city, how is the total CPI number determined for the ...
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How is an spontaneous currency changing phenomenon called?

On November 2019 I went back to Venezuela, and the biggest shock for me was that people started trading goods using US Dollars. This isn't "legal", but it has become so common that I hardly ever had ...
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What would happen if someones money would disappear when they die

So suppose that when anyone died all their net worth would be liquidized and the money would be removed from circulation. how would this affect the economy? I know this question is a bit broad, but ...
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39 views

What would cause the velocity of money (V) to increase / accelerate (or at least stop falling)

Given that: MV=PY Or P = (M)(V) / Y Where M is the money supply, V velocity of money, P price level and Y real GDP Considering that the current rate of M2 is increasing at 7% per year over the ...
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Linking creeping inflation to industrial revolution

The russian wiki on price revolution says Ползучая инфляция стала тем стимулом, который привёл в конечном итоге к промышленной революции, which translates to in the end result, the creeping inflation ...
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How much do the concepts and methodologies of GDP, CPI, PPP overlap?

Indicators of greatest importance in macro-economics are: the gross domestic product (GDP → comparison and growth of wealth) the consumer price index (CPI → inflation rate) purchasing power parity (...
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Forward exchange rates and inflation

Looking at forward rates, the exchange rate for the currency with the higher interest rate gets worse over time. This makes sense or else there would be an arbitrage opportunity to borrow in the low ...
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29 views

Understanding a Keynesian point of view

The statement is - Inflation is caused by independant cost push factors and causes an increase in money supply .This is from the Keynesian school of thought.How would cost push factors ,say an ...
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Can government just print a little of money to purchase some foreign resources?

We know that government shouldn't just print money, because it's gonna be bad. Bad what if to do it in a small scale, just a little, for example to hire some scientist (probably nothing gonna happen ...
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Why would expanding fiat paper issue lead to decreased exports?

I'm reading "A History of Money and Banking in the United States" by Murray Rothbard, and I'm having trouble understanding this one piece of history. Basically, the Massachusetts government issues ...
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Question on Central bank loss function interpretation

How do you interpret this central bank’s loss function: $$L(\hat x, \pi)=\alpha \hat{x}^2+(\pi-\pi^T)^2$$ where $\alpha >0$ and $\hat x$ is output gap. Phillips curve is $\pi = \theta \hat{x}+\...
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What insights can be gleaned from examining inflation spreads?

I was reading through some econ articles and there was much discussion on various measures of inflation. Though I'm not narrowing the scope to this article, I'll include the excerpt here for context: ...
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Difference between 2 ways of measuring sales against inflation (Compare Variation and Deflate)

Let's say we have these data: $p_{t-1}$, price index at time $t - 1$ = 100 $p_t$, price index at time $t$ = 120 $s_{t-1}$, sales at period $t - 1$ = 110 $s_t$, sales at period $t$ = 154 Then which ...
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What is the long term outcome of inflation?

I was just reading how \$1 from sometime in the mid-1800s is worth a little over $30 today. This got me wondering, where does this go in the long term? In the year 2400, will a loaf of bread be $200? ...
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How do major global events interact with debt cycles?

I recently watched Ray Dalio's video on how the economy runs on short/long term debt cycles. However I was wondering how other major events impact economic growth: How does the short and long term ...
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Does finding real income adjust for inflation?

I have been reading from this textbook which talks about CPI and inflation http://faculty.washington.edu/cnelson/Chap04.pdf On pages 5 and 6, it talks about how they are deflating the nominal ...
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What would mortgage payments be if monthly payments were constant in real terms?

From the Wikipedia: The fixed monthly payment for a fixed rate mortgage is the amount paid by the borrower every month that ensures that the loan is paid off in full with interest at the end of ...
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Calculating the amount paid for a loan in today's dollars

So I was trying to figure out the amount paid for a loan in today's dollars using two different methods but they give me different results. I was hoping that someone could explain which method is ...
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Expected Inflation and its results

I was reading a macroeconomics textbook and found two statements which seem kind of contradictory so I wish to ask how to correctly interpret this. “When expected inflation is high, people increase ...
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195 views

Why has M1 grown a lot faster than M3 after the financial crisis?

While the fed has printed a lot of money the last decade and the M1 money quantity growth rate has gone up significantly (red), the M3 growth rate (blue) is almost exactly the same as before the ...
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Explanation for Mundell-Tobin Effect

Apparently, Mundell and Tobin used different methods to explain the Mundell-Tobin effect (which means that in general higher inflation increases the nominal interest rate, but decreases the real ...
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Why loans/debt can cause inflation?

I learned that inflation can be a result of more loans or debt. When there are too much borrowers in the country, people will have more money to spend and the amount of products is the same so prices ...
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Why growth of national income in current prices during inflation not measured in poor sections and poverty alleviation programs?

Here 1) dwindles means reduce, smaller. Here is my doubt: If inflation fluctuates how can we use the word 'dwindles', what it means here? 2) Why the growth rate during inflation not measured in poor ...
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Can't we measure the growth in the income levels of poor?

Inflation has been a challenging aspect of policymaking. In such situations growth in the income levels of the population living below the poverty level can never be measured accurately (due to ...
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48 views

Why is price dispersion from Inflation called relative price “distortion”?

I know what relative price is and that it fluctuates more frequently in times of Inflation. But what I don’t understand is why it is called “distortion” when relative price dispersion is caused by ...
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How is hyperinflation categorized, and how is it fixed?

I have a few questions about hyperinflation that I’m really curious about: I learned there are two types of inflation - demand pull and cost push. I was wondering if hyperinflation fits into the ...
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Impact of healthcare and college tuition on inflation

For as long as I can remember people in the US have complained about the high cost and trajectory of college tuition and healthcare expenditures. I've also read that inflation has been low for awhile ...
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How to calculate inter-annual variation of inflation for a 3 months period?

I have the monthly indexes taken from the National Institute of Statistics of my country (below), then I can calculate its inter-annual variation easily: ((index month year - index same month year - ...
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Why can't a country print its own money to spend it only abroad?

If a country prints money and distributes it between the people, it causes inflation. But what if a country prints its own money to spend ONLY abroad, which would allow a country to buy whatever it ...
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Why is having lots of silver and not raising/decreasing taxes leads to inflation in a country?

In The Spanish Empire, Silver, & Runaway Inflation: Crash Course World History #25, it is claimed that "In ..., the silver was pouring into Spain, and because they were collecting same taxes as ...
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Universal Basic Income: Indexation and Inflation

Let’s assume a monthly Universal Basic Income (UBI) payment of \$1,000 and an annual inflation rate of 2%. I would like to understand what would happen to the real value of this UBI (its purchasing ...
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25 views

Manipulating index numbers

I have a producer price index which is the composite of 9 various commodity prices including that of coal. I want to remove the effects of coal price changes from the original index. I have data on ...
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Does the contractionary monetary effect of tax conpensate for its deadweight loss?

We all know that if the government impose a tax on a product, then tax revenue is less than loss in consumer and producer surplus. This is known as deadweight loss. We also know that taxing is a ...
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Best way to measure company size relative to world GDP

I'm working o a model where corporate revenue / world GDP is a dependent variable of some stuff (based on the model proposed in this paper: http://www.scielo.br/scielo.php?pid=S1807-76922009000200002&...
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Why is a little inflation good for the economy? [duplicate]

This is a slightly general question. It's often said that slight inflation keeps the wheels of the economy running. Why is that the case?
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Puzzle: Fairness of consumer price indices

I have learned a bit how the consumer price index (= inflation rate) in Germany is calculated. It's a complex process, which takes into account a lot of measured values (mainly specific prices for ...
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87 views

Why is an inflation rate of 2% optimal? [duplicate]

Learning from different sources I got the impression that the European Central Bank targets at a inflation rate of 2% (not sure along which time scale actually). Can it be explained by general ...
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The law of supply and demand - How does it work?

I've learned what the principle of supply and demand says, and would paraphrase it like this: The price of a good is at equilibrium when supply and demand are equal. Or with other words: The ...
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Calculation of Inflation and purchasing power

kindly I'm stuck in this problem instead of many attempts through net present value and other discounted cash flow methods, some one could give me a detailed information and answers on this problem : (...
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51 views

Quantity theory of money

Suppose the velocity of circulation (V) is constant. Annual growth rate of real GDP is 5%. The money supply grows by 14% per year. Use the quantity theory of money to calculate the inflation rate. My ...
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Are corporate savings deflationary?

Example: Apple. People "overpay" for their products, money that ends up in corporate savings and not in their competitors' coffers, sort of a black hole because Apple doesn't see enough investment ...
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Did Zimbabwe have an inflation of 89.7 sextillion percent?

From a Cato Institute article by Steve Hanke1 (emphasis added): The Economist’s most recent infraction on Zimbabwe’s hyperinflation appeared in the May 2016 issue. The magazine claimed that the ...
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Is a loan lent with a rate under the inflation rate free money?

Suppose we have an inflation in a country with an annual 2% and we get a loan for an annual 1% (real interest). Is the money we receive free? This is a common practice in some European countries, ...