4 ms·
Yes, aggregate demand is increased but aggregate savings, which are the source of investment, are decreased. Those assets of the minority, we're assuming, are a
by snrplfth 10y ago
Yes, aggregate demand is increased but aggregate savings, which are the source of investment, are decreased. Those assets of the minority, we're assuming, are also productive. So the prices of the assets purchased by those with 'significant income' go down. So this might manifest as increased prices on low-end staple goods and decreased prices on durable assets. Still doesn't imply general inflation. (Of course, this is a major bone of contention of the whole Monetarist vs Keynesian debate, so if you think the Keynesian account is more convincing, then that's a sticking point.)
- rad88 10y agoMany if not most Americans have investments, so the effect is not exactly balanced. Households that could do so would adjust their portfolios taking into account the additional guaranteed cash flow. Investment also reacts positively to the expectation of inflation, though that's getting more speculative. I think I've reached the limit of what I can do with Econ 101, but I hope to have shown that there's at least a principled claim to UBI being inflationary. Rising consumer price levels alone is inflationary under some definitions, and the effect on investment is not straightforward.