# 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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### Where did the money supply go?

The money supply went from about \$4 trillion in 2020 to about$20 trillion today. Where did all that money go? When the money supply went from about \$1.4 trillion to about$1.7 trillion, I was ...
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### If the interest rate is increased to limit inflation, doesn't that increase the money supply?

If the interest rate is increased to limit inflation, doesn't that increase the money supply? Because one year later, 5% of the total bond will need to be created and put into circulation. This, in ...
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### Why raise UK interest rates to control inflation Now - May 2023?

The usual reason given for raising rates to control inflation is that it reduces consumer spending, increases borrowing costs and slows the economy. However, in an environment where the inflation has ...
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### Change values from nominal to real in LM portion of ISLM?

Given $M / P = L(Y, i)$, where $M/P$ is the real money supply, and $Y$ is GDP, $i$ being the interest rate, we know that this equation makes demand of money equal to supply of money. Therefore, ...
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### How is QoQ and YoY inflation calculated from data in the table below

I am confused about reference point for both QoQ and YoY. Is for Q1 is it (Q1 - 0)/0 * 100?
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### Inflation adjustment: CPI less than one

I need help on how to adjust my figures by inflation. I have two pieces of data. The first one is a company's nominal expenditures during the 2015-2020 period: ...
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### Which foreign currency has had the least amount of inflation over the last 50 years?

I found this table that lists currency exchange rates relative to the US dollar. https://fx.sauder.ubc.ca/etc/USDpages.pdf I noticed some currencies have increased in value relative to the dollar and ...
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### Why does increase of national debt of the USA not lead to inflation?

Increase of national debt is increase of money supply. But why does increase of national debt of the USA not lead to inflation? Thanks.
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### Short-selling domestic currency to hedge against inflation

A person lives in a country with a high risk of inflation. She just started working, so she has little savings. Her goal is to ensure that her future income does not lose value because of inflation. ...
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### How does breaking away from a larger nation effect the economy

I am working on making a fictional world, and I really want to make the economics realistic, so I decided to come here to ask questions. The context is that a large nation went through a large civil ...
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### Decreasing Policy Rates but Increasing Banking Rates on Loans

In Turkey, we have been experiencing a chronic problem: Inflation. Since first quarter of 2021 central bank has been decreasing the policy rate, which is related to a political situation. However, ...
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Although the Federal Reserve has been raising interest rates for about 1 year, and inflation has slowed down, prices are not going down much. What are the benefits of raising rates slowly? Obviously ...
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### Effect of QT and higher bond yields simultaneously

I don't know much detail about how banking is working so you will have to bear with any misinformation or false conjecture I may have. The US government wants to control inflation in 2023. The Federal ...
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### Relationships between several economic concepts, and chatGPT's explanation [closed]

Sadly I have so little knowledge of economics that I can barely read the news these days. Answering my questions the old fashioned way (via Google) tends to confuse me more. So I asked chatGPT, but I ...
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### How to assess whether inflation is "well understood"

I was told (correctly) that the ability to forecast something is not the same as understanding it. I was also told that inflation is pretty well understood by macroeconomists nowadays. How do ...
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### Good inflation models

A well-received comment on this site stated: Pundits might not understand inflation but macroeconomists actually understand inflation well nowadays What models are currently used to forecast ...
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### What tools the central banks and governments can use to tame profit-led inflation and is the monetary tightening one of such tools?

While the central banks and the governments is not acknowledging it, the private bankers and economists are constantly labeling current inflation trend as the profit led inflation. This morning UBS ...
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### What would happend if the total quantity of money get fixed?

I was wondering what would happend if the total amount of money get fixed in an scenario were there is not exchange of good and services between countries markets. I think maybe the fact that prices ...
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### perfect level of interest rates

The FED in the US has a target inflation rate and target employment. Given that mandate they set the rates which drives the rest of the interest rates on bonds, mortgages etc. Currently they have been ...
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As I understand, it is usually common practice, to choose DSGE models in such a way, that the steady-state inflation is freely choose-able and for simplifications it is than usually assumed to be zero....
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### Why does decrease in Feds fund rate lead to decrease in core PCE inflation rate?

According to the Fed's own forecasts inflation should reach 2% (as vowed) shortly after 2025 under normal circumstances from the below chart. I know that generally as Federal funds rate increases, ...
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### In the US, if the Fed stops hiking the Fed Fund Rate, how does it affect inflation rate?

I know if the Fed continues to increase the Fed Fund Rate, inflation eventually goes down. But what if the Fed stops hiking the current Fed Fund Rate, how does it affect current inflation rate if the ...
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### Are grains a Giffen good? Also does circumstances make a good - Giffen good?

I was going through microeconomics course and I came across the Giffen good. Now I have a scenario with me. A family only buys grains and chocolate from the shop and the price of grain is increasing. ...
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### Why not increase tax instead of interest rate rises?

To control inflation and reduce consumption, the Central Banks increase interest rates (eg UK). Wouldn't it be more beneficial (improved public services and infrastructure) to increase consumption ...
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### Expected vs actual inflation and the real debt burden

The real rate of return is given by: 1+r=(1+i)/(1+π) and it can easily be shown that: 1+r ≈ i-π+1 so that r ≈ i-π This can be used to calculate real rates of return, or equivalently the real debt ...
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### Why does a positive output gap shift the short run AS curve instead the demand curve?

I'm reading through Mishkin "The Economics of Money, Banking, and Financial Markets". In chapter 23 (of the global 13th edition), they introduce the AS/AD framework. What confuses me is the ...
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### Real debt burden

Many economists believe real interest payments-to-GDP is a superior measure of debt service burden than nominal interest payments-to-GDP. My question is why we divide real interest payments by nominal ...
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### Are there valid concerns of USD hyperinflation post stimulus?

This article The Dollar Endgame is probably one of many doomsday predictions that exist, but there were a few points mentioned that were new to me and seemed scary: "Debt virtually always has a ...
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### Current US inflation rate is 7.1% and Fed vows to reduce it to at least 2.00%, how long could that possibly take?

If the Fed keeps raising interest (e.g. 0.5%) and vows to reduce interest rate to at least 2.00%, how long could that possibly take? Thanks.
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### Why highest inflation rate in US was only 9.06% since pandemic when the price of some essential items have doubled or even tripled?

In the US, I have noted that essential items such as food or household items have doubled or tripled since the pandemic, but the highest inflation rate was only 9.06% (for June 2022), why? See: https:/...
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### MMT and bond sales

Proponents of Modern Monetary Theory claim that bond sales are unnecessary and only help central banks set interest rates (which should be 0% anyway according to theory) and to provide safe interest-...
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### Is it correct to say that just because a single unit of a country's currency has less value, doesn't necessarily mean that there was inflation?

Casual student of economics here, I believe I share the layman understanding of Inflation (and even then I think there are still gaps in my logic) When you hold public shares of a company, you hold a ...
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### Understanding the terminal condition in the Taylor rule

I am currently reading this summary of various theories on how central banks control inflation. However, I got quite confused in section 3.2.4. Here is the context. Suppose we have a log-linearized ...
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### How to convert unchained nominal US personal income values to 2012 chained dollars

I have 1980-2021 data for US personal income (nominal, unchained) and I need to convert all those years to chained 2012 dollars, and then convert it from nominal to real. I looked up the formulas and ...
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### Why is the US dollar not depreciated after the US printing more money than usual?

I heard even when the US was printing more money (Quantitative Easing), with US dollar the main transaction currency of the world, the whole world has to pay the price of the US dollar depreciating. ...
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### Example of formula bias in CPI

A macroeconomics textbook explains the formula bias in the consumer price index (CPI) in the following way: This bias results because price data are collected on a ...
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### Why is there inflation?

As a follow up on How inflation really works? I wonder: Why is inflation or deflation "necessary"? And why is the one better than the other (is it?)? Can't we raise wages (and the like, ...
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### Does printing more money necessarily lead to inflation?

Does printing more money necessarily lead to inflation? For instance, if the money supply increased, but the money just sat around and wasn’t distributed to people, would that still cause inflation? ...
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### "The GDP deflator reflects what's happening to prices not quantities." Is this true?

While looking at the GDP deflator this situation popped up that made me question the quote above from Mankiw Economics 5edition p446. But if we do the maths, we can see that the GDP deflator for this ...
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### Is it possible for the stock market to beat inflation forever?

Just a few thoughts on the possibility of markets beating inflation in the long, long term (say, hundreds of years). I am a theoretical physicist, not an economist, so please forgive my ignorance. I ...
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### Nominal financial variables reflect all available information on inflation?

Okay, a lil bit stupid question... Consider the Fisher approximation that, Nominal interest rate = Real interest rate + Expected inflation rate, Does this not posit that the nominal (short-term) ...
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### What are the names of the school(s) of economy that believe that printing enough money to be 100% sure price inflation always happen, is a bad thing?

What are the names of the school(s) of economy that believe that printing enough money (and spending) to be 100% sure price inflation always happen, is a bad thing? Those schools must also be against ...
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### Why do central banks feel the need to do something about the current inflation levels

We hear in so many places that the current high levels of inflation are mainly due to supply side problems, like the war in Ukraine. Given that there is currently less supply then we are all ...
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### VAR model and simulation scenario

I have a VAR model to forecast key economic variables like gdp and inflation, but I want to be able to do some sort of simulation to study a particular scenario. I am running inflation expectations ...
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### GBP Currency Crisis - Forex supply and demand affecting exchange rates

Reading this article on Why China Buys US Treasury Bonds I understand the notion of supply and demand affecting a currency value against the other and how they need to buy up the excess dollars they ...
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### What happens to the economy if a country simply ban inflation?

Recently Belarus simply decided to ban inflation. the president quoted "From today, any price increase is prohibited. Prohibited!," This is easy to do for a dictatorship but how economy is ...
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### log differencing and VAR model

I am working on a VAR model to forecast inflation using variables like CPI prices, oil prices, unemployment rates, PMI, inflation expectations, policy rates, and GDP. To use the VAR model for my ...
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### Machine learning and Inflation forecasting

Is machine learning a good tool to use in order to forecast inflation for the short term (next 2 - 3 years on a monthly or quarterly basis)? I want to be able to forecast inflation for Canada for the ...
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### How do Foreign Investments by Central Banks increase the Money Supply of an Economy?

Trying to understand if "money supply" and "currency in circulation" apply only to the money within the borders of the country or does it also include its money in foreign nations ...
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