It doesn’t make sense to me. I used to be all like but then everything increases in price still Yada yada. But recently… why can’t we just lower the prices of petrol artificially. Why can’t we just lower housing prices by law?? Why can’t we erase inflation seeing as it’s completely made up anyway.
In: 0
Because it will just lead to shortages and buying anything will be like trying to buy a Playstation 5 or RTX 3070 last year. Inflation is caused by too much money chasing too few goods. You *could* reduce the money supply in the economy, and that’s what you’re essentially doing when you raise interest rates. This makes it harder to borrow money shrinking the supply of money. Some countries have successfully stopped inflation by doing what you’re suggesting paired with policies that limit wage increases which are very unpopular plans.
Latest Answers