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To be pedantic, I think it's that inflation occurs when supply of dollars increases relative to the demand for dollars? I'm not sure what, if anything, it means
by mac01021 5y ago
To be pedantic, I think it's that inflation occurs when supply of dollars increases relative to the demand for dollars? I'm not sure what, if anything, it means for demand to exceed supply.
- jl2718 5y agoWell, yes, it depends on how you define demand for a transactional medium, which is not easy. You could see it as having something to do with the sum of all immediate capital obligations, like loan payments or salaries, plus consumption at a given price level, and international exchanges. But my point is that those market factors easily dominate balance of supply and demand, such that the only thing that matters is the efficiency of the economy. So even if taxes could balance the budget, the reduction in investment would kill more demand than supply. Therefore, if correct, the only thing that matters is efficient spending.