Inflation

Inflation is the rise of the general prices of an economy in a period of time caused by money supply growth.

Zettelkasten, February 18th, 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

Wikipedia. Inflation

Backlinks

Money Supply

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