eli5: If a 2% inflation is considered good and healthy, will this not at some point cause abnormally high money values or a currency crash?

Question

eli5: If a 2% inflation is considered good and healthy, will this not at some point cause abnormally high money values or a currency crash?

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Answer 1

Not necessarily.

Look at the Japanese yen as an example. Their currency means you have to spend like 100 yen fir a soda, for example. This hasn’t had a significant impact on the value of Japan’s currency.

Keep in mind that as it currently stands, a person from 1920 would consider our currency to *already* be abnormally high money values. Milk is like 30x more expensive in terms of dollars than it was 100 years ago.

Currency crashes happen when a currency is over or under valued. Inflation happens over a long enough timescale that demand adjusts accordingly.