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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28 views

If a country experiences high domestic inflation compared to its trading partners with a fixed exchange rate then the effect of inflation will be to? [closed]

A.decrease the county's imports B.shift the country's currency supply curve to the right requiring central bank purchases of the domestic currency to maintain the fixed exchange rate. C.increase the ...
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44 views

Why Keynesians prefer short run measures despite straight long-run Phillips curve?

I was studying about the Monetarists' and Keynesians' view of the Phillips curve and natural rate theory of Friedman. It seems intuitive to me as to why Friedman argues that using an expansionary ...
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How would a global Robin Hood deed affect the economy? [closed]

In one fiction series about a dystopian world, a small group of wealthy criminals owned a large fraction of the world's cash, which was on their bank accounts in a single offshore bank. In the happy ...
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What is meant by an inflation rate spoken in the typical news?

The news usually says that inflation for a certain month is say $2.57\%$. It is never said relative to what. Should I assume that is relative to the previous month? If that's so, then the more ...
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Could you solve inflation by creating more goods?

If inflation is caused by there being more money to comparison to goods, if you increased production of goods to match the pre-inflation ratios of money to goods, would you effectively solve inflation?...
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Could eliminating all taxes and only creating new money theoretically work?

Imagine you had the opportunity to found a new country from scratch (in 2020). Value exchange would be digital, where only the state can create new currency units. Instead of relying on income tax ...
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Why are the YTMs of TIPS of longer maturities more sensitive to current interest rates and inflation rates?

According to this website, the yields of TIPS of longer maturities are greater than that of TIPS of shorter maturities. It seems counterintuitive since yields of longer-maturity bonds, which are based ...
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Even at the break-even inflation rate, isn't the YTM of a TIPS greater than that of a normal treasury bond?

At a the break-even rate of inflation, the semi-annual interest payments from a TIPS and a normal government bond would be roughly equivalent. However, the principal amount originally invested in the ...
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What is the ideal way to update an old value to today's currency value?

For example, how much is $25 million in 1790 considered today? How do I update such value? It doesn't make sense to me to use, say, price indices. Shouldn't such update be done based on the ...
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Did real incomes drop significantly since the 1950s?

From what I heard, in 1950s America, you didn't have to go to college to support a large family and a stay-at-home wife. People could buy houses easily, drove giant cars and didn't worry about gas ...
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Using the Federal Reserve's Implicit Price Deflator to Convert to 2020 Dollars

I have a list of government expenditures from 2011 to 2018 as shown below: 2011 2012 2013... 2018 $30m $35m $42m $120m How can I use the Federal ...
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Can the U.S print infinite money? [duplicate]

I know that a country can't simply print money to pay debt, since it would only lower the value of the money, i. e. cause inflation. But what about the U.S? Since their new printed money is very ...
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What effect has the 30% increase in money supply from Feb-June of 2020 had?

I commented on a previous question that this is probably a better one. Old question Generally speaking, how has the increase in money supply resulting from the CARES act stimulus package affected the ...
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Why may printing trillions of dollars not lead to inflation?

By definition, inflation should be affected by the increase of the money supply. During the pandemic, there have been numerous huge monetary policies executed, e.g., quantitative easing (QE), ...
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Does inflation equal change in M1 or M2?

According to monetarism, inflation can be predicted precisely by the change in money supply and GDP growth. Does "money supply" here refer to M1 or M2, i.e. does it include debts created by ...
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Why did Germany use hyperinflation to free itself from an external debt?

Im reading about how Germany used almost any solution To free itself from its WWI debt: hyperinflation, calculating payments on the basis of the economy's potential, rescheduling annuities and finally ...
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Why do all/majority of loan contracts charge nominal interest rate instead of fixed real interest rate?

As far as I understand, all/majority of loan contracts charge nominal interest rate, there are (almost?) no loan contracts that charge fixed real interest rate. Why is it so? Normally I would expect ...
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inflation rate vs interest rate on calculating present value of future money

i use the formula 100/(1+r)^T to calculate the present value of my future money while r is interest rate and T is year. However , for my country , interest rate (...
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Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare?

I recently read in a news article that a large amount of Libyan banknotes printed in Russia were seized in Malta following an order coming from the USA. Both Russia and the USA have geostrategic ...
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Deflate level and flow variables using PPI and CPI

What do statements like Flow variables (such as dividend growth and returns) are deflated using the CPI index. or Level variables are deflated using the Producer Price Index (PPI). mean? What are ...
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1answer
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How buying bonds indirectly from the government prevents the central bank from financing government deficit?

From Krugman's macroeconomic textbook (highlighting is mine): "In an open-market operation the Federal Reserve buys or sells some of the exist- ing stock of U.S. Treasury bills, normally through ...
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Why are US equity prices and inflation inversely correlated?

Many comments on this r/stockmarket Reddit thread hypothesize an inverse correlation between USD value and US equity prices. Why would this be true in theory? It's not true in reality, right? Has the ...
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How is buying gold during a recession helpful for the economy?

As far as I can see it, it is a selfish and fearful reaction to bad market conditions that would result in greater deflationary pressure. It is true that it preserves the owner's wealth, but unless ...
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Why does an economic slowdown lead to deflation?

Usually economists say that in recession there is deflation, so increasing the money supply does not lead to a high level of inflation. According to the Quantity theory of money, the price level is ...
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Doesnt fractional reserve systems limit collapse of the money supply?

For example the black death occurred in basically a full reserve system. Because there was no m2 to destroy, the fall in output was inflationary. The same money existed chasing fewer goods. Doesnt the ...
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stylized facts about inflation and output: fat tails, excess volatility,

I can find papers about the stylized facts, which would be excess volatility, fat tails, persistence, etc., about asset prices, but not really about inflation and output, which presumely would show ...
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How is using a reserve fund different from printing money?

It is a common knowledge and has been explained here on SE that the source of value is production and consumption rather than money, and that accumulating money is thus pointless. Yet, "rainy day ...
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289 views

How does an increase in USD money supply affect inflation?

Say an average american household is bringing in $50,000 a year. Between ongoing quantitative easing and the drastic stimulus packages passed in February-May 2020, the USD Money Supply increased by 25%...
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Best way to measure inflation in real time?

I'm looking to measure inflation in real time preferably minute to minute. What would be different feasible approaches to this? I know that the CPI measures inflation quite accurately but this is only ...
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Is there a complete picture of Inflation?

Is there a book, or a broad study, that explains inflation thoroughly? I've read so many articles, and there are multiple school of thoughts that approach inflation from different point of views. ...
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Why not create money to assist the post-COVID-19 economy?

In an imaginary country, a horrible computer virus infected some banks. Within a week, it caused the wealth of a large portion of the population (say, 50%) to drop significantly. For some, it cut 80% ...
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Expected inflation in the real interest rate equation

Real interest rate = Nominal rate - Expected inflation In the above equation, in a quarterly data-set, which expected inflation shall be used? next quarter (q+1) or the same quarter of next year (q+4)...
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Micro foundations of the Phillips Curve

In a typical NKPC: $Inflation_t = \alpha_1 Inflation_{t-1} + (1-\alpha_1) \mathbb{E}_tInflation_{t+1} + \alpha_2 RealMarginalCost + \epsilon_t$ From a micro-foundations perspective, does the ...
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What does it mean by Portugal having a negative inflation?

Portugal is experiencing a negative inflation rate for 2020. This means that the prices of basket-of-goods are decreasing this year. My first question is: is it a good sign for Portugal's economy? ...
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Real Effective Exchange Rates Based on Manufacturing Consumer Price Index for India

This question is from here What does "Real Effective Exchange Rates Based on Manufacturing Consumer Price Index for India " this mean? Does it mean the value of exports adjusted for ...
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Does Direct Benefit Transfers make an economy poorer?

Printing money and giving to the poor causes inflation. Increases demand and hikes prices. This is basically certain. But on the contrary, a paper titled Debunking the Stereotype of the Lazy Welfare ...
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How can we get negative **real** interest rate?

According to Fisher's equation, Real interest rate=Nominal interest rate - expected inflation rate So, how can we get negative real interest rate? I'm in doubts. On one hand, purely from algebraic ...
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How does the Monetary base, Narrow money and Broad money affect inflation?

In a lot of countries (e.g. Hungary) the M0, M1, M2 and M3 all doubled, tripled or even quadrupled in the past 10 years. How does this directly affect inflation? Since just because M2 doubles, it ...
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101 views

What is the tipping point for hyper-inflation?

The recent injection of $2 Trillion into the US economy has prompted me to wonder: At what point does introducing money to a system cause hyper-inflation? (such as Venezuela or other hyper-inflation ...
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What would be the “text-book” result of governement taking on massive debt immediately before a significant recession [closed]

Supposing, (entirely hypothetically, of course ;) ), that the UK government had taken on massive future debts (by spontaneously giving 2-3% of GDP to its citizens, in GBP, say.) immediately before a ...
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Does a rate hike by the Central Bank increase or decrease inflation?

Mainstream economic theory tells us that, in order to decrease inflation, the CB increases its rates so as to decrease loan creation which should decrease Aggregate Demand and thus lower inflation. ...
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Does inflation/expected inflation in a given country devalue its currency or increase its value?

I've seen both arguments. From my understanding an increase in the rate of inflation should decrease the value of the currency since it's by definition a depreciation in its purchasing power. But I've ...
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Value of money (incomes) question - what is the “r” here?

I would like some help with a fairly basic "value of money" question. (I'm very much a beginner in this field so please bear with me.) I'm writing about income changes throughout a decade (2010-2019)....
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How to calculate effects of inflation over a period of time

I am interested in weather there is a standard way of calculating and predicting the distribution of the decreased value over time as caused by inflation (something like money friction)? For example ...
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China's balance of payment and balance of trade - relation to inflation

I am struggling with understanding how China's balance of payments (negative, deficit) and balance of trade (positive, profit around 0.5 trln USD) affect it's inflation rate. Obviously, balance of ...
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2answers
38 views

Inflation vs GDP growth as factors driving down the US debt-to-GDP ration post-WW2

I'm trying to figure out how much inflation (vs GDP growth) shrank the debt-to-GDP ratio (in the decade or so) post-WW2 in the US. I found one paper that says: In 1946, the debt ratio was 108.6 ...
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Ambiguity on a relation between inflation, interest rates, and central banks

When working on inflation, central banks, interest rates etc., I summarized the info in various sources as follows: When there is not enough money in the economy system, the money in circulation ...
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Economic models failing to predict inflation

In this video here Warren Mosler states that all economic models fail to predict inflation ("All their models show it's indeterminate"). I am looking for some references to support that claim... Or is ...
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How has decreasing quality (or the need to pay more for the same quality) tracked with inflation?

I'm trying to identity a missing variable that could affect poor and middle class consumers more than more wealthy/resourceful individuals. Assuming that there are decisions regarding cost reductions ...
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Cagan Model of Hyper Inflation: Zimbabwe Data Request

Cagan Model of Hyperinflation Could anyone guide me where I could find the data for Zimbabwe that would allow me to estimate the Beta parameters. Also, what regression method would be most suitable (...

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