Inflation can result from excess demand from "summary" of The General Theory of Employment, Interest, and Money by John Maynard Keynes
When goods and services are in high demand, producers may not be able to keep up with the level of consumption. As a result, they may increase prices to balance the excess demand and limited supply. This increase in prices is what we refer to as inflation. Inflation can therefore be seen as a consequence of excessive demand in the economy. Excess demand can come from various sources. It may be due to an increase in consumer confidence, leading to higher spending levels. It could also be a result of government policies that stimulate demand through increased public spending or tax cuts. Additionally, excess demand can arise from external factors such as a rise in exports or foreign investment inflows. When demand exceeds supply, it puts pressure on prices to rise. Producers may raise prices in response to the higher demand, leading to an increase in the overall price level in the economy. This increase in prices erodes the purchasing power of consumers, as they need to spend more to buy the same goods and services. As a result, inflation can have ne...Similar Posts
Governments must consider intertemporal budget constraints
The concept of intertemporal budget constraints is crucial for governments to consider when making fiscal decisions. This conce...
We need to shift our mindset from scarcity to abundance
The prevailing view is one of scarcity - scarcity of resources, of money, of opportunities. We are constantly told that there i...
Over time, Bitcoin's price stability is expected to improve as adoption increases
Bitcoin's price stability is closely related to its level of adoption. As more people start using Bitcoin as a medium of exchan...
The middle class was essential for a stable and prosperous society
The stability and prosperity of a society depend heavily on the presence and strength of the middle class. This group plays a v...
Be wary of investments that seem too good to be true
When it comes to investing, it is essential to approach opportunities with a healthy dose of skepticism. If an investment appea...
Central planning is inefficient and ineffective
Central planning involves a small group of people making decisions for the entire society. This group believes they have the kn...
The history of oil is complex
The story of oil is a convoluted tale of intrigue, discovery, and exploitation. It is a narrative that spans centuries and cont...
Unemployment rates
Unemployment rates are a key indicator of the economic health of a country. They reflect the number of people who are willing a...
Behavioral economics explores how psychological factors influence economic decisions
Behavioral economics delves into the intriguing ways in which our brains can sometimes lead us astray when making economic deci...
Central banks influence interest rates through monetary policy
Central banks play a crucial role in influencing interest rates through their monetary policy decisions. Monetary policy refers...