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 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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22 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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74 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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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, ...
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How can I adjust the base year of this price index?

I am given the following data for GDP deflator: 1997: 100.0 1998: 100.8 1999: 102.5 2000: 109.9 2001: 112.5 2002: 115.9 2003: 119.7 2004: 122.1 2005: 126.5 ...and so on. Currently, 1997 is ...
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Demand-pull inflation versus going up aggregate demand curve

From what I understand, the AD curve on the AD AS model represents how the price level and real GDP will change when the AD increases or decreases. So if you go up the AD curve, the price level ...
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Nominal and Real GDP [closed]

If nominal GDP is, for example, \$1,620 billion in 2017 and increases to \$1,680 billion in 2018, is the growth rate 3.7%? Or does real GDP first need to be calculated using a deflator?
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Is there a standard methodology for calculating real prices?

Is there an established professional standard used by economic / financial institutions for including or excluding i) the starting year/period, and ii) the end year/period when calculating real prices ...
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Demand- pull driven inflation, how does it work if we dont add money?

I been thinking about the theory demand-pull driven inflation. If there is the same amount of "money" in the system this could not happen imo, there would always have to be a trade off what would ...
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Lower monthly inflation at the beginning of the year

Good afternoon, I just looked at several EU HICP time series, and what struck me was the fact that quite often the monthly inflation rate was way lower (even negative) in January/February, at least in ...
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Can inflation occur in a positive-sum game currency system such as the Stack Exchange reputation system?

As most active users of this site know, the way the reputation system works is that everyone starts out with 1 reputation and a user can earn more reputation by asking good questions and writing ...
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Calculating 3m annualised rates

Calculating 3m annualised rates is a concept I've been struggling with for some time, but I think the below example illustrates what I am looking at trying to understand. The past 6 months of monthly ...
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1answer
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Extraction of Inflation Expectation from bond yields

In my introductory monetary economics course we have learned that inflation expectations can be calculated by comparing yields on index-linked and conventional bonds of equal maturity and assuming a ...
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Why are the Fed's goals often described as the “dual mandate” and not the “triple mandate”?

The Federal Reserve Act Section 2A states: The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit ...
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Why inflation is still reported low?

Recently I heard from Richard Koo's video, that central banks have injected so much money to the banking system. There is enough reserves in the U.S. banking system to increase money supply 16 times. ...
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Would $1000/mo UBI funded by 10% goods and services tax cause prices to skyrocket, making the divident useless? [duplicate]

If everyone in the US was given $1000 per month, paid for by a goods and services tax of 10%, would prices then skyrocket, making the extra money useless? For example, if I wanted to buy products X, ...
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Real Income and a Fixed Money Supply

What would happen to nominal income and wages if the money supply were fixed (100% reserve banking). Would real wages increase, even though nominal wages would stay the same or even decrease?
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Positive Phillips Curve

I am doing some research for a class project for Phillips curve of countries. For a certain country that I am doing, I am getting a slope for the Phillips curve to be positive. Is this possible? ...
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Exploratory analysis about elasticity

I have been asked to perform some studies about the price elasticity of demand of an online seller. The concept of elasticity used by economists are more clear to me after some research on ...
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154 views

Why does capital flight cause inflation?

Context: I was watching a video about Venezuela, and, it all started with capital flight due to poor confidence in the government. The government tried to stop it, and in the process it created a ...
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Debt-to-GDP ratio in connection to inflation

On this segment of the Tucker Carlson show, interviewing Robert Hockett, as an advisor to Rep. Octavio-Cortez on the proposed Green New Deal, the following interchange ensues: Tucker: "On the low ...
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Inflation adjusting by exchanging currency and using other countrys CPI

I want to inflation adjust some values from China. The values are the values in a given year. I have them both in Chinese Yuan and American dollars for a given year. Now, there is no CPI data for ...
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Is there consensus on why inflation is not rising?

I find it kind of odd that we are not experiencing any significant inflation recent years despit the low rates and quantitative easings. Is there a consensus why this is the case among economists? If ...
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Inflation index and longevity of modern 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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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?