Notes - inflation - Classic definition of inflation:...

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Classic definition of inflation: Monetary Inflation : Increasing the Money Supply Common definition of inflation: Price Inflation : Reduction in buying power of a currency, hence increased prices Historic inflation relationship: In a normal economy with a normal velocity of money, price inflation = monetary inflation –productivity growth with a year lag. Causes: 1. Excessive growth: shortage of labor, material, etc. 2. Government Inaction: money supply, interest rates, regulation 3. Government subsidies: generating excess demand 4. Price controls: Kills investment and innovation, profit capped 5. Tariffs 6. Commodity supply and demand 7. Wage inflation 8. Excess money supply growth: Growing faster than productivity 9. Currency controls 10. Currency conversation: international trading in of currency 11. Currency devaluation or monetization
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How to measure inflation - CPI: Consumer Price Index CPI basis: cost of a basket of goods, not a true cost of living Basket categories: food, shelter, furnishings, clothing,
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Notes - inflation - Classic definition of inflation:...

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