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Economist here! Inflation is an increase in the aggregate price level. There isn't a single cause. Under the velocity of money theory (which most folks learn i
by tomrod 4y ago
Economist here! Inflation is an increase in the aggregate price level. There isn't a single cause.
Under the velocity of money theory (which most folks learn in AP Economics and intro college economics courses), an increase in dollars can indeed map to an increase in aggregate price level. Since the sovereign controls the money supply, then "printing money" is indeed considered a driver of inflation under that model.
Being a model, it doesn't capture all elements (especially dynamics and feedback cycles).
Further, a government printing of excess money is not the only way to increase the money supply in circulation. Large generalized increases in discretionary spending can do the same (another injection into the money supply) -- consider Japan.
For folks wanting an accessible intro, investopedia does a decent writeup: https://www.investopedia.com/articles/05/012005.asp https://www.investopedia.com/articles/05/012005.asp
- WalterBright 4y agoThe single cause is a devaluation of the currency. The price rise that results is explained by the Law of Supply&Demand - more dollars lowers the value of each dollar.
- tomrod 4y agoIncreased dollars were two factors I mentioned in my comment, yes, and the primer will discuss other factors you have missed that I did not discuss that aren't more dollars chasing the same stock of goods. Good luck out there.