Question by : How can there be wealth creation without inflation when economic growth creates inflation?
Sure; a buck twenty five today was just a buck 10 years ago. However haven’t you observed that, in nominal terms, the US economy doubles in size roughly every 12 years?
And isn’t it true that we try to keep our growth at a steady 3% a year sweet spot so they we don’t trigger too much inflation with our growth? So as it wipe out the gains of the wealth added? Notice economies that grow at a rate faster than 5% a year often suffer high inflation as a result.
Best answer:
Answer by Pluto C. Rat
US richclass thievery — that’s how.
What do you think? Answer below!
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{ 4 comments… read them below or add one }
When inflation doesn’t keep up with GDP that can be a problem. No one loves inflation, but we need it in order to spread money through people.
I think it’s more of the keynesian type economists who say an overheated economy causes inflation. Free market economists like Thomas Sowell says more money supply going after the same amount of goods and services is the true cause of inflation, and I agree with him.
Inflation is the expansion of the money supply. That destroys people’s savings and the poor get screwed the worst.
Economic growth is likely (not always) to lead to inflation when capacity utilization is high. The key is productivity. That is to say, economic growth is possible, even when capacity utilization is high, as long as productivity increases.