For example, if our “reproduction rate is 1%” meaning our population doubles every 72 years ish, wouldn’t that essentially mean that inflation would be 1% less likely to occur each year because now there are more people that utilize this money supply both by taking and giving to the economy? And could this essentially be taken off of a discount rate that we might use when analyzing any future investments?
In: Economics
The relationship between inflation and population growth is complex and not always a straight line. Here’s a simplified explanation:
* More people, more demand: A larger population can lead to higher demand for goods and services, which can put upward pressure on prices (inflation).
* More workers, more production: But more people also means a potentially larger workforce. This can increase production and supply, potentially offsetting inflation.
So, a 1% population growth rate doesn’t directly translate to a 1% decrease in inflation. The impact depends on how well the economy keeps up with the growing population’s needs.
This doesn’t directly affect discount rates used for future investments. Discount rates consider factors like future interest rates and inflation expectations, but not necessarily population growth.
Latest Answers