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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186 views

Explain inflation to an economic novice

I'm trying to get a grasp on how exactly inflation works. What I've read so far seems to be contradictory. In some articles I've read that government spending is always(?) inflationary, and in ...
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141 views

Impact of hedge funds on economy

I'm still kind of new to these things and some countries seem to be forbiding sharing more about hedge funds to casual people (at least what I understood from it), but anyway: What is/was the largest ...
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68 views

Does the inflation rate reflect only the change in quantity of money?

Does inflation rate during the years comes from the the proportional difference of current amount of currency and amount of currency 1 year ago. I mean lets suppose in 2000 there were 1 million ...
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1k views

Understanding Inflation in a video game

I don't understand where inflation occurs in a video games. Assuming "free market" ie unlimited new players can enter any universe at will. You will say that for an economy to form, both sides must be ...
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1answer
1k views

Will inflation rate be the same if we use different base year?

I saw this chart where CPI for 2003 is 1.84, for 2004, is 1.889. I dont know the base year because its not in the chart. But base year has to have CPI of 1. If we instead use 2003 as base year, is ...
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1answer
71 views

What's effect of introducing infinitely high denomination bank notes during hyperinflation?

Countries that suffer from hyperinflation often print banknotes with many zeroes. Recently I had a showerthought: Let's imagine a government suffering from hyperinflation go crazy and begin begin ...
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3answers
992 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
458 views

Can CPI and real GDP have high correlation?

I have historical data where the CPI and GDP are correlated. Does this make sense? If not, how do I test for it?
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28 views

Relationship between changes in Currency against basket of currencies and inflation

Sorry I'm not an economist, but I was wondering if there was a general country by country guide to how inflation there changes with response to a change in the currency's value against a basket of ...
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1answer
60 views

Adjusting a ratio variable to constant 2000 dollars using a deflator index

Using Deflation index to create constant 2000 dollars, if I am finding a variable that is a ratio of that variable to GDP (say, income tax revenues), how do I go about this? Should I first divide my ...
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1answer
21 views

How will the value of the pound affect the British economy?

Given the recent massive decrease in the value of the pound, does this not equally devalue the British economy by a similar amount? Why does that not lead to an immediate large crash in Britain as ...
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133 views

Would a Job Guarantee impact Cost of Living?

What effect would a job guarantee, a method of achieving full employment often suggested by modern monetary theorists, have on the cost of living? In the case of student loans offered by the ...
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1answer
480 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
69 views

Could indexation of wages help Argentina?

In Argentina we experience one of the largest inflation rates of the world.(please click the top of the inflation rate column to order by inflation rate). This is a large problem that causes stress ...
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1answer
80 views

Are BLS labor productivity measures in current dollars or constant dollars?

I am using BLS labor productivity measures to estimate the impact of automation in the US. Looking through the BLS handbook and online, I haven't been able to determine if the LPC measures are in ...
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2answers
124 views

Why can't goverments print money to fund their economies? [duplicate]

In previous questions I understood that printing money and injecting it in the economy generates inflation because there is a bigger demand for the same offer (please correct me if I'm wrong) so it's ...
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2answers
159 views

Why does an increase in money in circulation increases price levels? [closed]

I'm a physics student who likes economics very much. I'm trying to get a simple explanation for inflation. I hope that there is one that doesn't involve people willingly rising prices. Thank you very ...
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78 views

Can the central bank interest rate policy still control inflation?

Historically, central banks have been using interest rate policy to control inflation. In current times, most rates have been going ever lower, but it seems to be incapable of driving inflation up. ...
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61 views

Can a government or central bank work to reduce inflation without hiking interest rates and causing the currency to appreciate?

Since trying to lower inflation will have some undesirable consequences, such as currency appreciation, which hurts exports, should governments and central banks keep hands off on inflation? But ...
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79 views

British inflation up again, but crisis might come. What should the BoE do?

According to the latest ONS report, inflation is rising as a consequence of the (pre/post) Brexit devaluation. This graph about the Input PPI is pretty revealing (taken from here): Yet, with the risk ...
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2answers
113 views

Demand-pull inflation intuition

According to the theory, monetary growth increases inflation. But how do companies know that there is more money in the economy now than before?
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435 views

Difference between a fixed pricing system and a two tier system regarding inflation onset through illegal transactions

I hope this layman's question is not off topic. I was not able to find guide lines as to how professional questions have to be. I am trying to qualitatively understand the origins of the Tiananmen ...
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3answers
18k views

What is the relationship between inflation and imports/exports?

According to the aggregate demand curve, when the price level is higher, the real GDP demanded is lower. One of the explanations given is a consequence of the Mundell-Fleming model: "As the price ...
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2answers
324 views

because bitcoins do not generate earnings, then (it is a ponzi scheme)?

What does the author mean with: Since Bitcoins do not generate any actual earnings, they must appreciate in value to ensure that people are willing to hold them. Why must they appreciate in ...
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59 views

Macroeconomics and equilibrium

Preliminary note: I have nearly zero economical background, I am a physicist and my question is probably very naive, but I would like a clear and simple explanation. If I am not wrong, the global ...
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4answers
8k views

Why does the European Central Bank use the 5y5y rate to measure inflation

I cannot understand why the 5y5y swap rate measures inflation. I can see how the floating rate somewhat measures the rate of interest rates which are related to inflation. However I cannot understand ...
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769 views

Why is the Chilean economy so much better than the rest of the countries in South America?

Why does Chile have a better economy than all of the other countries in latin America? It is labeled as a high income country by the IMF, It is the only Latin American country that is part of the ...
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282 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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49 views

Basic model where inflation occurs

Why does inflation occur? To an outsider, inflation appears somewhat mysterious. Is there an extremely simple mathematical model where inflation naturally occurs? I would like something that even ...
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124 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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42 views

On official bank rate of Sweden

I been hearing that the actions of the ECB greatly influence the swedish offical bank rate, what possible "actions" would that be, theoretically?
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144 views

Venezuelan black market exchange

EDIT: for future reference, I found out that many businesses price accordingly to the black market rate. Trading at the official Venezuelan exchange rate is, at time of writing, about 1:10 USD:VEF. ...
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45 views

Why is the current WDI missing CPI data for some countries (including the UK and China)?

I'm downloading data on inflation in different countries, and using the World Bank's World Development Indicators (WDI). Specifically, the Consumer Price Index series (CPI). (http://data.worldbank.org/...
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323 views

How much inflation will changes to official wage benchmarks cause?

For example, right now Livable Wage hovers around \$20 an hour. That's around \$40,000 a year. Let's say the US somehow will give \$50,000 a year as a "Guaranteed basic income". How high will the "...
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1answer
2k views

How do I adjust for inflation?

I will begin by saying that I have very little knowledge about economics, so don't make any presumptions. My problem is that I want to calculate the actual value of gold in Swedish Krona(SEK) for the ...
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1answer
46 views

Ln differenced price level times 400, why 400?

I am replicating a 2001 Journal of Economic Perspectives methodology paper on Vector Autoregression by James H. Stock and Adam Watson. The paper can be found here: http://faculty.washington.edu/ezivot/...
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3k views

Why did the Fed raise interest rates between 2004 and 2006?

Between June 2004 and August 2006, the Fed raised interest rates again and again, because they were "...growing more uncomfortable about inflation". Looking at the graph below, inflation did increase,...
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367 views

Why is deflation not considered the opposite of inflation?

In this article from 2013 on bitcoin, the author casually states the importance of knowing that "deflation is not the opposite of inflation", without expanding or elaborating. I'm sure that there are ...
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2answers
177 views

Monetary Policy - How can increasing interest rates cause higher inflation in the short term?

My understanding of the interest rates part of monetary policy is the follows: Borrower's point of view: An increase in interest rates, increases the cost of borrowing, which may reduce disposable ...
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1answer
81 views

Is inflation good? [duplicate]

I was reading that the Spanish received so much gold from their occupation of the Americas, that they had a steep rise in inflation. This caused a rapid increase in investment, as the rich felt that ...
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1answer
48 views

Why do Latin American countries fare among the worst at managing inflation

Does it have to do with cultural factors? Ex: they were colonies of Spain and Portugal who themselves are not that great at managing their economies relative to other western European countries.
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66 views

Core inflation, QE and credibility of ECB

In macro we learn that credibility is very important for a Central Bank (CB), since it allows for less onerous adjustments for the economy. In the recent(?) past, the newspapers have becoming ...
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1answer
40 views

Is there an economic term that means the same thing as “personal inflation”

I don't have anything even close to what would be considered formal education in terms of economics, so the term "personal inflation," is just something I completely made up. What I mean by personal ...
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1answer
399 views

Effect of positive inflation shock on the exchange rate

How does a positive inflation shock affect the exchange rate? Does the exchange rate appreciate or depreciate? I am looking for an intuitive explanation.
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96 views

Can changes in the value of money be measured via interest rates and future contracts?

For most goods, we can compare the value of them by how people trade them. If in a free market, 10 apples can be traded for 20 oranges, then apples are twice as valuable as oranges. Likewise, if 10 ...
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517 views

Equal payment series compound interest problem

I am stuck on a textbook question for a long time now. What is the amount of quarterly deposits A, such that you will be able to withdraw the amounts in cash flow diagram if the interest rate is 8% ...
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33 views

Inflation in items of daily use

I was reading a document released by our Central Bank and I came across this line: Finally, inflation in the items of daily use was much lower as compared to other items. The contribution of ...
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882 views

Does a strong US Dollar hurt American Manufacturing?

I am reading this article about the strengthening of the US Dollar when I came across this paragraph: "But there are reasons to be cautious. A strong dollar will squeeze American manufacturers, ...
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245 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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860 views

Why do increase in firms profit margins cause cost push inflation?

I read somewhere that this was the case. I get what profit margins and cost-push inflation are, but don't see how increase in marginal profit causes cost-push inflation? Also, how does increase in ...

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