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
Value is something different than the actual number printed on the bill. It’s an abstract measure of how “useful” something is to us. Nobody decides how much “value” money has. It’s dictated by the ebbs and flows in market forces.
Theoretically we could have zero inflation. We could also have deflation. Steady inflation is not a law. Most western nations intentionally create small amounts of steady inflation, since this drives investment.
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