I do not understand how inflation works if my life depended on it. I understand that it’s an occurrence when you have something in excess amount (like money), thus it becomes worth less.
But why does it become worth less when we give money value? Could we not assign the same value to the same things we have in an excessive amount? Is inflation a law of sorts?
It’s so confusing to me.
In: Economics
Inflation doesn’t “have to exist”, but it’s proven very, very difficult to maintain stability during deflationary times. Even a tiny bit of “stagflation”, where things are even or slightly deflationary, tends to dry up investment money and lead towards depression. So if the region between +1% and -1% is unstable and tends to turn into -5%, then central banks are going to get to +1.5%
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