 |
|
relative to goods/services produced
Posted on: March 6, 2024 at 14:46:01 CT
o'lineydisciple MU
Posts:
6699
Member For:
25.62 yrs
Level:
User
M.O.B. Votes:
0
If for example the entirety of the economy is $100 and 10 cars, there were 10 people and everyone needed a car, then cars would be $10.
Increase the money supply to $200 and cars will be $20. Increase the number of cars (and people needing them) to 20, and cars are $10 again.
Think of the money supply as the numerator and all the goods/services produced/available to buy as the denominator.
This is why COVID particularly was spectacular in increasing inflation: the money supply increased sharply AND at the same time, the production of goods/services drastically (albeit temporarily) decreased.
Increase the money supply to $200 and cars will be $20. Increase the number of cars (and people needing them) to 20, and cars are $10 again.
Think of the money supply as the numerator and all the goods/services produced/available to buy as the denominator.
This is why COVID particularly was spectacular in increasing inflation: the money supply increased sharply AND at the same time, the production of goods/services drastically (albeit temporarily) decreased.
Please explain why this message is being reported.
MESSAGE THREAD
- 
relative to goods/services produced - o'lineydisciple MU - 3/6 14:46:01