Pedro Arantes
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Inflation

Inflation is the rise of the general prices of an economy in a period of time caused by money supply growth.
#economics
Zettelkasten, February 18, 2021

Notes

  • Inflation is the rise of the general prices of an economy in a period caused by money supply growth.
    • Note that the general prices may increase, but the cause may not be by money supply growth, but for supply and demand changes, for example.
  • If the inflation is positive, the general prices increases and each unit of the currency buy a few products and services.
  • The opposite of inflation is deflation.
    • The general prices of products and services decrease.
  • Long period of sustained inflation is correlated with money supply growing rate higher than the economic growth rate.

Questions

  • What is better: high or low inflation?

  • What are the second-order effects of high inflation? And a deflation?

  • Why inflation increases when the money supply growing rate is higher than the economic growth rate?

References

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