That is a very simplistic way of looking at inflation. When you consider both okuns law and the Philip’s curve, and the relationship between them anything that changes GDP or unemployment rates will affect inflation. Tech changes, foreign demand on products, government changes, interest rates (the most common lever), pay rates - it all feeds into inflation in some way or another. And yes, government increased money supply is also a big inflation driver.
Calling it a symptoms is like calling dying a symptom of car crashes, when there is a multitude of other ways it happens.
The supply demand is for a single item. It doesn’t work in the wider economy because as one good gets more expensive people switch to similar goods that didn’t increase - price increases, q demanded falls, customers swaps to a mirror good or don’t buy at all.
Changes in technology is a supply side, not demand side. On foreign demand im referring to changes in exchange rates that can affect GDP and associated inflation pressures.
Inflation is not growth in the money supply, money supply is one way that inflation can occur, but the basis of inflation is the increase in nominal costs of everyday prices.
Again, you are giving examples of price changes in specific goods, not inflation.
Supply shock - is specific to the asset experiencing the shock. This is not inflation.
Wage growth - the specific asset here is human capital.
Inflation is when all prices increase, or equivalently, when the buying power of the fiat currency reduces. I.e. when more money exists than there was before.
The symptom of inflation is the general increase in price of everything.
Inflation is growth in the monetary supply.
(Also velocity of money but that I’d never discussed, let alone measured.)
Everyone in this thread is talking about price inflation, not monetary inflation.
Price inflation is the visible outcome of monetary inflation.
That is a very simplistic way of looking at inflation. When you consider both okuns law and the Philip’s curve, and the relationship between them anything that changes GDP or unemployment rates will affect inflation. Tech changes, foreign demand on products, government changes, interest rates (the most common lever), pay rates - it all feeds into inflation in some way or another. And yes, government increased money supply is also a big inflation driver.
Calling it a symptoms is like calling dying a symptom of car crashes, when there is a multitude of other ways it happens.
Price increase is the symptom of inflation because it happens after the cause.
The reason you list interest rates is because it is lever to control money supply.
Everything else you list is demand, what money is spent on, and subject to normal supply and demand pricing.
Just because a price changes, doesn’t mean it’s inflation causing it.
You’re getting your models confused.
The supply demand is for a single item. It doesn’t work in the wider economy because as one good gets more expensive people switch to similar goods that didn’t increase - price increases, q demanded falls, customers swaps to a mirror good or don’t buy at all.
Changes in technology is a supply side, not demand side. On foreign demand im referring to changes in exchange rates that can affect GDP and associated inflation pressures.
Exactly, and the single item in this case is the US dollar. Increase the (money) supply and it’s value goes down relative to everything else.
Inflation is a function of the fiat currency it references, not the goods that currency buys.
And the money supply increased enormously during the pandemic. So it’s real inflation.
Inflation is not growth in the money supply, money supply is one way that inflation can occur, but the basis of inflation is the increase in nominal costs of everyday prices.
It is caused by this.
And the other is a reduction in quantity of goods and services.
No, that is the result of inflation, not the basis (reason).
And supply shock, and wage growth, and tons of other things. You literally said “inflation is an increase in the money supply”
Again, you are giving examples of price changes in specific goods, not inflation.
Supply shock - is specific to the asset experiencing the shock. This is not inflation.
Wage growth - the specific asset here is human capital.
Inflation is when all prices increase, or equivalently, when the buying power of the fiat currency reduces. I.e. when more money exists than there was before.