Is mild inflation inevitably necessary for the economical development?
- 2 months ago
Not always, there are many different ways to boost an economy. But inflation can create more jobs (in the SHORT-RUN) which boosts the economy. If a govt. wants to create a sudden boost in jobs (maybe after a recession) then they may print more money. People will have more money to spend, which leads to a higher demand and encourges the firms to hire more workers, which increases productivity, our living standard, and the overall economy. Notice I said it increases jobs in the SHORT-RUN. If the govt. continues to excessivly print money then prices will rise and the dollar will slowly lose its value. So as long as we keep money printing undercontrol and don't do a 1920's Germany (there are very few jobs avaibale during a Great Depression) then we shouldn't have to worry! :)
- BigBillLv 73 months ago
Easy money, i.e. low interest loans to ANYBODY, is the cause of a boom, then bust, then inflation. Banks are the driving force behind business cycles.
- Anonymous3 months ago
There are only two causes of inflation, population growth, and how we utilize resources. If population continues to grow, inflation is necessary. There has to be more currency for more population which makes currency worth less than it was, because everyone essentially shares everything through working and buying. How well we share is dependant on wages and / or civil design. The other one, resources, is really just a matter of how wasteful we are vrs how well we share. Wealth is a prime example of this. An apartment complex can house a few thousand people for a building that costed 3 million dollars to build. Whereas a billionaire may have a single family home worth 5 million. The billionaire causes a significant amount of inflation when he/ she chooses to live this way. His home raises the property values of cheaper single family homes, and apartment complexes alike. Inflation is a balancing beam. In one side are people, on the other side, are all available recourses.
- RayLv 63 months ago
Slight inflation is healthy, it keeps prices stable and works as an incentive for spending.
The alternative would be either hyperinflation which is disastrous, or deflation which gives people too much incentive to save, which in effect causes a major decrease in consumer spending which results in businesses going out of business, thus layoffs thus mass unemployment.
0 inflation is impossible, so a little bit of inflation is healthy. USD has had low stable inflation for well over a century which is extremely good, thus it has become the worlds #1 reserve currency, the petrodollar and many nations peg their currency to the USD.
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- ZirpLv 73 months ago
No, creating money - to compensate for what leaves the circulation by landing in the pockets of those who have no need to spend it - is.
Unless you stop the rich from getting richer, and accept zero economic growth
- OiyLv 43 months ago
No, not at all. It is important to shift AD upward to the potential point. Economic development is the thing to shift PPF upward. Technological innovation can put economic growth and development without rasing inflation.
- 3 months ago
Yes friend it is. The alternatives like rampant inflation is disastrous. And deflation isn't good for economical development.