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Why would there need to be any extra dollars? If inflation is a matter of supply and demand of currency, as you say, then shouldn't we expect that a demand-side
by Calavar 4y ago
Why would there need to be any extra dollars? If inflation is a matter of supply and demand of currency, as you say, then shouldn't we expect that a demand-side shift could lead to inflation without any change in the money supply?
- hnick 4y agoMakes sense to me, the thing that matters is not total money but active money. Prices go up because there is the same amount of money, but sellers expect more, and buyers are used to paying more. This can continue by having their proportion of earnings/wealth spent increased which increases total liquid money supply, until they are at capacity (i.e. spending their whole income, selling off assets, etc). Basically the inverse of people being averse to spending and instead hoarding cash, leading to deflation as prices are lowered to tempt them into spending again.