4 ms·
Equation of exchange is a cornerstone of economics https://en.wikipedia.org/wiki/Equation_of_exchange https://en.wikipedia.org/wiki/Equation_of_exchange The
by ClumsyPilot 2y ago
Equation of exchange is a cornerstone of economics
https://en.wikipedia.org/wiki/Equation_of_exchange https://en.wikipedia.org/wiki/Equation_of_exchange
The monetary side is Quantity of Money times Velocity of money. Both affect inflation. It is therefore Possible to have inflation with fixed money supply.
You may argue it is not likely, or it is not relevant, but to argue it is impossible is like arguing about physics but disbelieving in the laws of motion.
- robertlagrant 2y agoI'm a beginner here - how does this make sense? Why would spending money lots affect inflation? My simple conceptualisation: If I sell my heap of junk car to my neighbour for $10000 this week, which he buys for sentimental reasons, and he sells it back to me for $10000 next week, for sentimental reasons, and we continue doing this every week, what would drive inflation? Conversely, if the government doubled the money supply, suddenly people from outside are earning much more money than they used to for the same work, and to them $10000 is worth half what it was, enough to get them to bid $12000 and get the car. They might only do that once, but the price has inflated.