Eli5: Why can’t prices stay the same/inflation be 0%?
In: Economics
Governments control the monetary supply and try to maintain a slightly positive inflation rate.
You want money to devalue by 1-2% a year so that people and companies don’t just squat on it – they have to invest that money in tangible assets or businesses and keep the economy rolling.
If your money didn’t lose value – or worse, gains value – there’s an incentive to hoard it. Making sure money stays invested and not sitting in McDuck vaults is part of the central bank’s mandate.
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