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As clarified below, not necessarily: it has nothing to do with the quantity of money being created. However, I would also like to point out that some inflation
by roguecoder 13y ago
As clarified below, not necessarily: it has nothing to do with the quantity of money being created.
However, I would also like to point out that some inflation is desirable in order to prevent hording of cash and that the informational value of money is improved by giving everyone a floor on income. Basically, when the optimization function of our economy only takes into account the preferences of the rich and the government, we create many inefficiencies in the production and distribution of goods and services. When we instead redistribute money such that everyone has at least some, the economy is more efficient and production changes to match. If more people want to buy simple clothing and the price rises more people will make simple clothing and the price will fall again.
This is the hypothesis I have heard for why raising the minimum wage doesn't lower employment (the experimental result which perhaps most clearly demonstrates the flaws in modern macroeconomic models.) People who receive minimum wage spend it on other goods that are produced employing more people who earn minimum wage.