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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138 views

Solutions for the de-dollarization of the Democratic Republic of Congo

While reading this article, I was wondering about the policies the DRC's government could employ to make the congolese franc appreciate. To appreciate the currency, the DRC by decreased investment in ...
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3k views

Inflationary recession vs Deflationary recession

I heard the terms deflationary recession & inflationary recession in a podcast and would like to understand what it means, what causes them and past examples.
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96 views

Difference between chained CPI and normal CPI in simple terms

I am taking a community college level intro to macro course, and while self-studying the text, I came across the concept of C-CPI or chained CPI. While I feel I have a grasp as to what CPI is, I have ...
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173 views

Is printing money to pay government expenses regressive or progressive taxation?

Lets say that the government decides to pay some of its expenses by printing money*. This (according to some schools of thought) effectively increases the inflation rate and devalues the value of the ...
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188 views

Creative destruction and quality-adjusted inflation rate.

I'm reading this article in VoxEU.org, and there's the following paragraph: If the statistical office is correct to assume that the quality-adjusted inflation rate is the same for creatively ...
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1answer
161 views

Can PPP adjusted values be compared over time?

I'm a little baffled about this: Let's say I want to compare the average income of 2 countries, A and B. Of course I'm interested in the real income so I adjust to PPP using the big mac index of that ...
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86 views

Political theories of inflation

A recent op-ed (paywall) in the Financial Times about inflation stated that (emphasis mine): Across the developed economies, the Phillips curve has gone ignominiously flat. The world's leading ...
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87 views

What are the constituents of a country's inflation

If we assume a country where only demand pull inflation holds, that is no imports cost inflation or currency fluctuations are a risk, then we can assume that inflation is determined by: Consumer ...
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1answer
141 views

Norway inflation and exchange rates

I am looking at Norway's economy, and I'm trying to make sense of some of the data I see. Norway's economy has a very close relationship to crude oil, and in 2014 crude oil had a massive drop. Looking ...
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3answers
620 views

Basic Reason of Why the Money Supply Needs to Increase? [duplicate]

Hello, all. So I am trying to gain a thorough understanding of why the Fed, or any other Central Bank, needs to keep pumping money into the economy as it grows. My question is not asking why ...
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2answers
116 views

Determinants of economic growth in ARDL model - nominal or real variables?

I'm investigating the determinants of economic growth of my country. Some of them are of long term other are of short term. For that I'm trying to construct an ARDL model, but I'm confused about the ...
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Inflation-adjusted units of account

In Chile, most of prices are measured in the local currency, the peso (currency code CLP). However, there are two other units of account. These are the UF and the UTM. These keep track of the real ...
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272 views

Tax by inflation

I am interested in a system where the state prints new money to cover all its expenses. (There is no direct tax collection.) I'm interested in anything you might have to say about this system, but to ...
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2answers
102 views

Inflation , Housing Prices, Is there some form of the CPI that can include Home Prices?

I understand why we don't include real estate in the CPI. It makes sense, when it is explained to me. I also understand Rent is included in the CPI. However? I live in Canada . Our Populations ...
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1answer
351 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 ...
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609 views

Solving for price incease

The following table lists the basket of goods in the Consumer Price Index for the nation of Astro​ (Assume 2014 is the base​ year.) ...
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1answer
85 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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85 views

Why does a reduction in regional differences in unemployment shift the Phillips curve?

According to this question below, apparently a reduction in the regional differences in the level of unemployment would shift the short run Phillips curve SRPC leftwards. The answer to the question is ...
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4answers
655 views

How does inflation work in real life?

So when the government prints more money, then it is said the people will have more money in general and as a result the prices of goods and services will also increase. So in the end, we will end up ...
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2answers
3k views

How exactly does money supply causes inflation?

I think there's consensus among economists that a growth in money supply (I'm not thinking in any particular type of money supply) causes inflation (CPI), at least, in the long run. What I'm ...
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2answers
88 views

Print money to buy and nationalise companies

If there's a water company worth £4 billion making £500 million a year profit, the government "prints" £4 billion and buys the company, then every year "burns" half the profit and reinvests the other ...
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184 views

Do credit cards create more printed money

As far as I know, when people take a loan from a bank, most of the loan value is electronically printed money, i.e. money that did not exist before. Is it also what happens with consumer credit cards? ...
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155 views

Why imports increase if higher relative inflation?

I'm reviewing a previous AP Macroeconomics exam and I saw the following question: The United States and South Korea are trading partners, and the United States has a zero current account balance. ...
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66 views

Causality: Money supply and prices

When there is an increase in price level, real money supply decreases and raises interest rates. In a similar situation, when money supply decreases, interest rates increases, consumption decreases, ...
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154 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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228 views

Real GDP explanatory variable

In order to make an econometric model for explaining the evolution of the US Real GDP, does it make sense (from an economic point of view, not from a statistical one) to include CPI (as a proxy for ...
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1answer
154 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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183 views

Is human psychology really reflected into inflation?

I am a total noob in economics, but I'm trying to understand why do we have inflation. I can see that prices are increasing over time and, by definition, this means inflation. I'm fine with this ...
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36 views

How can one compute the CPI All items index from the component indexes?

How can one compute the CPI All items index given the CPI energy index and the less energy index? I used the relative importance as component weighted value but it isn't true.
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Confused about relation of inflation to a currency's depreciation?

I'm a complete newbie to this foreign exchange stuff and was reading about the impact a country's price levels have on exchange rates. So from what I understand, the general idea is that inflation ...
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2answers
1k views

Fisher Effect vs Quantity Theory of Money and how an increase in the money supply lowers interest rates?

I was under the impression that in the long run, a larger money supply resulted in lower interest rates. According to the Quantity Theory of Money, see below figure, an increase in the money supply -> ...
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3answers
73 views

Why not just look at the money supply to calculate inflation?

I see a lot of debate about the right measure to use to determine inflation -- apparently the CPI overstates it, etc. Why not just subtract the GDP growth rate from the money supply growth rate (or to ...
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Increased inflation rate on borrowers and lenders

I'm trying to understand a concept in microeconomics. So if inflation increases while nominal interest rate stays the same, what are the substitution effects and income effects on borrowers and ...
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477 views

Why is wage-induced inflation a bad thing?

More than once, I have heard on the news how the US Federal Reserve would raise interest rates to counter the risk of inflation, even when they indicate that the potential inflation would be caused by ...
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69 views

Why would increased inflation increase the value of the dollar and bond yields?

I was reading this Fortune article (http://fortune.com/2016/11/14/donald-trump-victory-dollar-inflation/) and came across this confusing quote: "'Clearly the market has settled on a 'buy dollar' ...
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281 views

Deflation and positive real interest rate [duplicate]

Economists say that deflation leads people to postpone their consumption because it increases the value of their money and gives them the ability to consume more in the future. But if a consumer saves ...
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1answer
177 views

Government debt and Fiscal Theory of Price Level

I am trying to understand the Fiscal Theory of Price Level (FTPL) and how it explains inflation. I've been reading several papers by Eric Leeper and I am slightly confused about some of his claims. ...
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146 views

Inflation vs Deflation [duplicate]

Why is in flation preferable to deflation? I appreciate this is largely due to the fact that deflation causes a large decrease in demand as people continually wait for prices to decrease, but if ...
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1answer
41 views

What happend to the dollar value in the time of the housing crisis

I am wondering what happens to the value of the coin in a country with an housing crisis. Take the USA as an example: They had a housing crisis and I wonder how it effected the value of the dollar and ...
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What could cause the spike in the Venezuelan unofficial currency exchange?

In November last year the unofficial currency exchange rate in Venezuela skyrocketed. It was only one month later that the government was able to slow the increase rate to “normal” values. The ...
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Recent estimates of CPI bias?

The Dec 1996 Boskin report (May 1997 AER summary) concluded that the change in the Consumer Price Index (CPI) overstates the change in the cost of living by about 1.1 percentage points per year (...
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807 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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10k views

How does tariff increase inflation?

The Wall Street Journal claims that: Some are concerned over the likelihood of the U.S. adopting trade tariffs on imports from China. This policy option would risk retaliatory measures and hurt ...
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725 views

Interest rates, inflation and liquidity effect

I am currently reading Alvarez, Lucas, Weber (2001) where the authors argue that changes in money supply is more important for affecting inflation, than changes in the interest rate. However, I am ...
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136 views

How does inflation affect the value of savings?

Well, I got basically a question about economics of our world, I hope I'm wrong in my assumptions, because it's pretty ugly and I'm really hope it's more about me being wrong than it's actually the ...
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2answers
532 views

What happens if money supply grows more slowly than inflation?

I'm thinking the case of Argentina. In 2016, prices raised about 40% but according to the central bank of Argentina, money supply grew only 30%. Is this going to have an effect in 2017? What could we ...
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Did a similar property boom take place in another country or throughout history like we have seen in London? If so how did it effect the economy?

The London property market has seen a sharp increase in the average house price. If we go back to the 70's the average UK and average London price were almost the same, however since than the gap has ...
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398 views

What caused the stagflation in the early 1970s USA?

I am aware of the conventional reasons: demand push inflation due to much higher oil prices, and a continuation of a mild recession. Looking for a clearer explanation than I have been able to find, ...
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55 views

Printing money to put into a Superannuation or UBI fund

It is fiscal policy to keep inflation at between 1-2% (in New Zealand at least) Various tools are used to keep inflation in this range. Let's say the average inflation rate is 1.25% What would ...
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Does the FDIC's insurance of your money in your bank account cause inflation of the bank were to go under?

If the fdic insures money in each account for a bank, and that bank goes under. Won't that mean the fdic will have to borrow more money from the fed and thus lead to substantial inflation?

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