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To: Sonny M
Increases in money supply are what constitute inflation

Increasing the money supply is just of several ways by which inflation may manifest itself. You can also see a decrease in purchasing power arise from a devaluation of the currency that is driven by political instability, or competitive pressure. Prices may also rise on supply issues; where the cost of production, or scarcity of a key component (such as refined oil), results in a broad ranged cost increase which constricts supply and boost prices.
32 posted on 11/16/2005 11:26:46 AM PST by ARCADIA (Abuse of power comes as no surprise)
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To: ARCADIA
Increasing the money supply is just of several ways by which inflation may manifest itself.

I think you have cause and effect reversed. Inflation doesn't manifest itself in increased money supply, increased money supply manifests itself in inflation.

You can also see a decrease in purchasing power arise from a devaluation of the currency that is driven by political instability, or competitive pressure.

Devaluation of currency means an increased supply is needed to buy the same items.

Prices may also rise on supply issues; where the cost of production, or scarcity of a key component (such as refined oil), results in a broad ranged cost increase which constricts supply and boost prices.

If output is reduced and money supply remains constant, the extra money supply is manifested in inflation.

34 posted on 11/16/2005 11:32:10 AM PST by Toddsterpatriot (If you agree with Marx, Krugman and the New York Times please stop calling yourself a conservative!!)
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