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Questions tagged [inflation]

the generalized increase of prices in an economy, or the increase of the price level over time

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household appliances

The cost of household appliances and TVs are part of the Inflation Index. It is well known fact that modern appliances and TVs last 1/3 -1/2 time as comparing to 10-20 years ago and every time we buy ...
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Currencies fixed to gold

Based on the quoted section & example below: Why would the Franc or USD fall in price vs the other if they are both fixed to gold; why would having less gold cause paper money to contract? Why ...
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The Crisis of Argentina

newbie here. Q1 - What needs to be done by the Argentinian government for their currency to regain back its strength? Q2 - Why has the Argentine Peso depreciated against the U.S Dollar for more than ...
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Quantitative easing

Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the ...
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Paying Filipino workers in USD. What should the inflation rate be?

I'm not sure where to ask and, since this is not Personal Finance, I'm gonna ask it here. Here's my situation: for the past 2 years, I hired and trained a team of Filipino workers. They are paid in ...
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Inflation risk premium: consumption growth and stochastic discount factor relationship

I am trying to figure out the logic that lies into the concept of inflation risk premium. I have a well understanding of the definition: compensation demanded by the bond investor for being exposed to ...
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How purchasing power reduces when currency is commodity money(say gold)

First of all I am new to Economics. I'm a B.Sc.(Mathematics) final year student. I was curious to learn Economics so I started with "Economics in one lesson" by Henry Hazlitt. In this book I ...
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How does raising interest rates calm inflation?

My understanding is that by raising interest rates, domestic CPI indices are less likely to rise signicantly. However, raising interest rates also attracts capital inflows and can create asset bubbles....
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How to treat different frequencies of a time series data?

I have annual GDP, annual CPI, monthly exchange rate, and monthly export data. I would like to go for estimation being monthly stock return as the dependent variable. What are the methods to treat the ...
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Why did it take so much QE by the ECB to raise the Eurozone inflation to 2%?

From 2015 to 2018 the ECB increased the money supply by around 20% (around 6% y/y), with a GDP increase rate under 1%. Yet the inflation rate remained under 2%. A back-of-the-envelope calculation ...
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How to convert an historic value denoted in foreign currency to a modern value in local currency?

I want to convert GBP in 1968 to USD in 2018, in order to "translate" an amount paid by an individual in Britain fifty years ago. My intention is that an American reader today will be able to better ...
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Why is the measured year 2018 inflation rate low despite rounds of quantitative easing?

Is it correct to state year 2018 inflation rate of 2.2% is very low? Is it correct to state that even though the commodity prices have not increased, the increased money supply coming from the ...
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real exchange rate formula doubt

Real exchange rate formula is the exchange rate multiplied by the ratio of two prices. what does this ratio actually imply? What is the rationale behind taking the ratio?
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Explaining fluctuations in inflation rate

I have been tasked to explain the changes in economic performance of a particular country as part of my class assignment. In particular, I need to explain the changes in the inflation rate of Malaysia ...
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What is a Labor Rate Index

For an report (professional not academic) I was asked for the Labor Rate Index of my region, which is a data point I've never been asked for before. After some googling I've found the term referred ...
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How does printing money cause inflation?

I've had this doubt for a long time and I still can't find a proper answer to it. Most answers I get just partially explain the phenomenon of a general increase in price level. I want to understand ...
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Car prices haven't changed in 20 years, no inflation?

I notice that there seems to be little or no change in car prices over the last 20 years and they seem to be unaffected by inflation. For example, a Toyota Camry sold for about \$23,000 +/- \$2,000 (...
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Cost-push inflation and labour shortage

Is it possible for there to be a shortage of labour in an economy when there is cost-push inflation?
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Crude oil price changing factors

I tried to summarize my thoughts about oil price changes, and try to understand the next weeks. Will decrease price: OPEC output is higher every month, increasing supply. interest rates goes up, ...
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How inflationary is progressive taxation?

Compared with, say minimum wage increases, how inflationary is progressive taxation?
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tariffs and inflation

tariffs lead to inflation; is this the same as inflation from supply constraints or demand drive, given that the tariff is removed from the money supply? How should the fed be thinking about this in ...
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Why would higher expected inflation increase corporate earnings and dividends' rate of increase?

A Random Walk Down Wall Street (2015 11 ed). p. 125. Determinant 4: The level of market interest rates. The stock market does not exist as a world unto itself. Investors should consider how much ...
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Why can an increase in inflation rate, increase interest rates?

A Random Walk Down Wall Street (2015 11 ed). pp. 224 Bottom - 225 Top.   Changes in the rate of inflation will similarly tend to have a systematic influence on the returns from common stocks. This ...
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How would a “one-way” fixed exchange rate backed by destroying foreign currency work?

Note: This question may seem really pointless, but it's actually in the context of a cryptocurrency idea I am developing, but I posed it this way as the question is not really about cryptocurrencies ...
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What's a product that historically has always had the same value, and probably will in the future?

Money usually has inflation tied to it, but is there a product that has stayed around the same value world wide for a very long time, and probably will for a very long time as well (something like 100 ...
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Can the CPIH be used to find the real terms rise in price of a component of the basket of goods?

I want to calculate the real terms rise in UK private rent prices since 2011 using the CPIH measure. The indexes of nominal rent prices and the CPIH rose by 14.7% and 13.5% respectively, so I can say ...
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Simplest model of an economy exhibiting (hyper)inflation

I would like to find a minimal mathematical model for describing financial crises of the type that produces hyperinflation. Here's a naive attempt, just to give the idea of what I'm thinking of. ...
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Higher wages and lower prices?

I am reading an article about inflation where the author argues that defining inflation in terms of price level is too broad since if we do that then an anti-inflation policy would be a policy that ...
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Are there empirical studies that quantify shoe-leather or menu costs?

Two theoretical arguments why a high level of inflation is bad (e.g. for growth) are: shoe-leather cost: keeping lower money balances when inflation is high (implying more frequent trips to the bank/...
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What is the point of a constant (thus known) inflation rate?

I have read somewhere (attributed to Milton Friedman) that a good practice of monetary policy is to maintain a constant inflation rate (of 3% per annum, say). What is the point of that? If everyone ...
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Does accumulation of fiat currency cause instability?

If the value of fiat currency is a function of the supply of money and it's velocity, is the accumulation of that currency detrimental to its stability? I may be wrong in my understanding of the ...
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Why do central banks print money? [duplicate]

If a country's central bank prints money, it causes inflation. However, apparently, small amounts of inflation is a good thing. Why is the case? What would happen if central banks stopped printing ...
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Daily variable for inflation

I was wondering if there is a way to account for daily inflation data. I have daily short-term interest rates, and I would like to convert them to real short-term interest rates. Can I just average ...
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How is currency depreciation related to import tariffs?

In the news today they were talking about how the US is "threatening to increase proposed tariffs on Chinese imports from 10 percent to 25 percent." One of the reasons they gave for this was that ...
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Inflation, Monetarism and Keynesianism

Is there a strict division between the Keynesianism and Monetarism on the view of inflation. In other words, does the push and pull inflation only belong within a Keynesian framework and does ...
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Is inflation a lack of production?

If every person in America was given a million dollars what fundamentally changes that causes prices to rise? Intuitively I was thinking that this is simply a production problem. With more money there ...
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Devising a model for inflation for a closed points system

I am working on a project that involves points. The idea is that users will earn points and redeem them for certain rewards. The means via which the users earn are fairly limited (They can attend a ...
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Should mean wages increase with inflation?

Should mean wages increase with inflation? If not, why? Has this profound consequences in the redistribution of wealth? (not an expert in economics...I apologise is the question is too naif)
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Roosevelt’s Price Fixing in The Great Depression

Why didn’t Roosevelt’s method of fixing prices on labour and produce help the depression? If everyone was receiving a wage that allowed them to afford produce, wouldn’t that create a new equilibrium ...
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How does hyperinflation affect investment?

Title says it all - how does hyperinflation affect investment and how does this differ from how creeping inflation might affect investment?
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Expectation augmented Phillips Curve

Currently studying Intro to Macroeconomics, and faced Expectations augmented PC. In my textbook it is not clear how expected inflation affects unemployment. My view so far, is that expected inflation ...
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Why, in such a debt-heavy era, is inflation still such a Bad Thing(TM)?

Going through the Wikipedia article on inflation, a number of pros and cons to inflation are covered. Most of the "cons" of inflation (cost-push inflation, hoarding, hyperinflation, diminished ...
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In the UK, does the rate of annual price increases in food consistently beat inflation? How can we tell?

Informally, I've often seen it claimed that the price of food always goes up. Certainly, I do notice when the price of my £5 food bag goes up 50p or when my £1 milk goes up 20p. Yet, whenever I've ...
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Could the inflation following the Gold Rush have been avoided, are we any “wiser” on inflation now?

Quoting Milton Friedman on the inflationary period shortly following the American Gold Rush in California: "Because there was more gold, they had to pay a little more gold to buy goods and ...
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Which economical consequences could happen to a country if it forbiddes importing cars?

My country has major economical headaches each 10 years or so, like hyperinflation or defaults or things like that. It's been 17 years since the last major crisis (a larger crisis than the 1930's ...
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What really is inflation?

I understand that you measure inflation by first measuring what the average person buys. Then you compare the total cost of these goods in year x with year y to get the inflation (from x to y). The ...
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Can increase of NEER cause higher inflation?

I´m trying to find siutable econometrics model for explaining inflation during financial crisis and after. My final model shows that if NEERnominal effective exchange rate) increases, the inflation ...
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Interpretation of a case in which There is a significant difference between consumer price index and GDP deflator?

We know the both GDP deflator and consumer price index are often used for measuring inflation. Now my question is how a case in which there is a significant difference between them be justified? My ...
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Fiscal budget: spending in real vs nominal terms

What does it mean in the context of a budget to “freeze spending in real terms”? And how would this differ from freezing spending in “nominal terms”? I am looking to understand how this would be ...
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Interrelationship between inflation and foreign capital flow

For the below let's assume domestic currency is ₹ and foreign capital is in \$ Foreign Capital Inflow => ₹ Appreciates (Because of more \$) But consider this, Foreign Capital Inflow => More ₹ in ...