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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25
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6answers
4k views

Is zero inflation desirable?

Is zero inflation really desirable? To be more precise: Does inflation in real life have benefits that in some situations outweigh its social cost? E.g.: it works as a disincentive against holding ...
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1answer
248 views

Will a Guaranteed minimum income not eventually just be crowded out by inflation?

That is, if we implement a guaranteed minimum income, would inflation not eventually rise to a point where it is essentially useless? I would expect prices to be adjusted knowing people have a certain ...
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4answers
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From an economics perspective, what are the ramifications of a currency with fixed money supply?

I'm thinking specifically of bitcoins. What are the pros and cons of having a fixed number of coins, as opposed to more "normal" currencies? Would the currency have no inflation?
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2answers
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Inflation and economic growth

Noticeable works about the impact of inflation on economic growth are dated back to the 90s. For example, Barro (1995): the impact effects from an increase in average inflation by 10 percentage ...
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2answers
985 views

Why is modest inflation a good thing? [duplicate]

I have been reading a BBC news article about inflation in the UK, which is saying that inflation has recently become negative (http://www.bbc.co.uk/news/business-33147660). The article suggests that ...
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1answer
227 views

Inflation basics and understanding

In some new country, there's 1 million credits in circulation, and Product X costs 10 credits. If I were to print, say, 500,000 credits and build a new swimming pool with this, how exactly would ...
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1answer
308 views

What were the factors that caused the Philips curve to stop working during the 1970s?

Philips curve says that inflation and unemployment were inversely correlated. In the 1970s, stagflation happened. If Philips curve hold true, stagflation is impossible. What were the factors that ...
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3answers
994 views

Wouldn't an unconditional basic income lead to an inflation that negates its effect? [duplicate]

There are several version and denomination for a basic income. In this question, I will call unconditional basic income the situation were all citizens of a country receive regularly a lump-sum of ...
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2answers
155 views

If the price of oil and energy goes down, why does CPI go up?

Today, StatsCan revealed that Canada's CPI rose by 1.3%. They are attributing it to lower energy prices, led by the fall in the gasoline index (down 12.6% since one year ago). From my understanding, ...
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2answers
284 views

The Printing of Money for Paying Debt

I know that printing money causes inflation, but what if we print it to pay back our debts? For example, we have N dollars of debt to China. We can just print the N dollars and give it to China. ...
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1answer
300 views

Changing the base year of Real GDP from 2001 Euros to 1990 Geary–Khamis dollars

Estimating regional Gdp in Italy (1871-2001): sources, methodology, and results (Felice, E) This article has Italian historical regional GDP figures, but they are in constant 2001 euros not in 1990 ...
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3answers
743 views

Why is it that the “right” inflation is positive? [duplicate]

I have read in several places that inflation should be positive, at about 2%-3%. The most recent example was in this answer from another stack exchange site. How is this value obtained and under what ...
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1answer
96 views

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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4answers
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Can absence of inflation be accounted for by a reconfigured class structure?

A previous and oft-heard question asked why no inflation results from the Fed pumping money into the economy. Are we simply seeing a methodical wage suppression, thus no official "inflation," while ...
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3answers
573 views

Inflation, cause or result of monetary emission?

The argentine economist Fernanda Vallejos, while trying to protect the government because of the inflation, the following: Inflation is not the result but the cause of monetary emission. As there'...
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1answer
21k views

Effects of an expected increase in the inflation rate on the market for loanable funds

I am supposed to answer a question in my economics class and was wondering if someone could explain it out for me. The question is, What is the effect of an increase in the expected inflation rate ...
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5answers
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Does Inflation Make Money Eventually Worthless?

I used this calculator: http://www.buyupside.com/calculators/inflationjan08.htm to estimate the future worth of 100 dollars in 100 years at 2% inflation. Does this really mean that a decent meal at a ...
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3answers
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Inflation without Increase in Money Supply?

Is it possible to have inflation without increase in the supply of money? For example, if workers demanded higher wages, and goods went up in price, but the money supply in circulation did not ...
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2answers
155 views

What does the value of bitcoins depend on?

I've been looking up stuff about bitcoins for some time now and i have two question stuck in my mind: How is the value of bitcoins so unstable? And can there be bitcoin inflation?
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1answer
264 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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1answer
151 views

Differing Inflation Rates for Separate Income Groups; Literature?

So here's a few ideas that have been floating around my head since undergraduate university. It seems that money owned by the highest net wealth owners is always moving around and making a return, but ...
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2answers
359 views

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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2answers
126 views

Do heterogeneity in consumption baskets lead to very different inflation rates for different consumers?

CPI is measured against a single consumption basket. In reality, consumers each have their own set of consumption goods, so each face their own "individualized CPI" rates. But how different are ...
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2answers
172 views

Currency Values, Developing Economies and Balance of Trade

For a developing economy like India, where balance of trade is negative, is it good to have a weak dollar or a strong dollar? Dollar value increases (Rupee, the local currency, weakens), imports (...
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1answer
159 views

How do I verify Philips curve empirically for recent years?

I wanted to verify the relationship between inflation and unemployment empirically, so I took data from the World Bank and used excel to correlate them. I got a very, very bad correlation between ...
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1answer
488 views

In fisher equation, Should I use “expected inflation” not “actual inflation”?

In fisher equation, real interest rate = nominal interest rate - expected inflation rate During calculating real interest rate, I've question that whether I can use actual inflation rate instead of ...
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1answer
44 views

How could monetary policy be affected if cash “gifts” to consumers were more frequently used?

A few years ago in the US, everyone who filed taxes received a check for $1000. If this method of inflation was logistically more feasible, how could this be used in monetary policy, and what ...
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2answers
102 views

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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2answers
330 views

Why $nominal$ interest increases when inflation is expected to increase?

Why is it that if lenders expect higher inflation in years to come, they will most likely increase $nominal$ rates of interest opposed to $real$ rates of interest?
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0answers
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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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1answer
396 views

Testing the long run phillips curve / Contradicting empirical results?

I've been working with some historical macroeconomic data of the Canadian economy and am having difficulty empirically testing the Phillips curve long run and short run versions. I got the data from ...
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1answer
832 views

How should I adjust data for both inflation and foreign exchange rate?

I’m not sure if this is typically done, but suppose my data point is in 2013 JPY and I want to express in 2016 USD. Do I apply CPI to express data in 2016 JPY, and then apply exchange rate to 2016 USD?...
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1answer
87 views

Real GDP Computation and Justification

How does one really compute inflation? I just now quickly looked up how the real GDP was computed. It is using the base year price to multiply the number of products traded. Is that meaningful? Is a ...
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1answer
125 views

Can Okun's Law be used for forecasting?

Can one forecast $\Delta Unemployment$ and $\Delta Inflation$ using a VAR model based on Okun's law?
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1answer
48 views

What does “to be in the double digits to get inflation” mean?

Until last year, the Chinese government set 8 percent annual growth as a goal, and the economy frequently delivered several percentage points more than that. Then last March, the government pared ...
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1answer
40 views

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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1answer
60 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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1answer
38 views

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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1answer
24 views

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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2answers
77 views

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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1answer
360 views

Isn't the liquidity trap about real interest rates?

Here is a so-called thought experiment. Suppose the inflation rate is negative, the nominal interest rate slightly negative, and the real interest rate positive (call it $r$). I think people would ...