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But doesn't the federal reserve uses Consumer Price Index(CPI) to measure P. Looking at how CPI is measured, it doesn't seem like it has a strong correlation w
by duschang27 15y ago
But doesn't the federal reserve uses Consumer Price Index(CPI) to measure P. Looking at how CPI is measured, it doesn't seem like it has a strong correlation with M. Cost is directly related to M, but price is not. Under these circumstances, doesn't it encourage merchants to artificially up the sales price to maximize their profit, regardless of the cost?
- duschang27 15y agoand if the fed tries to lower the value of dollars to counter act this, wouldn't it ultimately dilute the profit of those who maintained the lower price? Thus starting the vicious cycle of price hikes