prices go up?
Why.
Help.
Why is government printing more money and giving it to me a bad thing. I need it to live.
I’d like both the econ101 (fake, lib, propaganda) and the marxist (real, truth, based) answer pls.
Money is a unit of measurement (like meters). Total volume of products bought and sold are measured in actively circulating money. If you double the amount of money in closed system, the prices would double.
But if we introduce production changes, say we learned to make bread easier, it should get cheaper. Actively developing productive forces will produce deflation on the same amount of money, which makes libs big sad (frankly for esoteric reasons).
If stuff disappears (logistic problems/wars), prices naturally rise (demand side curve is real, it’s supply and equilibrium which is shit), but not due to too much money volume. If stuff increases in price too much, workers suddenly start having opinions about their compensation, which makes porkies big sad.
Inflation also makes banks kinda sad, their nice loan of 100k now is 90k worth of stuff, so they hate it.
I’ve never thought of money like that. That’s interesting.
But why would prices double, if, say, the govt. gave everyone double the money they have, wouldn’t people just buy more stuff? And if there isn’t anymore stuff to buy (and it’ll take some time to make), then the money would just…be there? Right? You don’t spend it till you have something to spend it on?
But there isn’t any more stuff to buy, it is exactly where demand side kicks in. Say you have excess money and previously couldn’t buy, idk, ducati bike. Well now you and millions of people can buy it. Ducati will be like “omg, we can’t produce this shit this fast, but we can raise prices to a level where what we produce will be sold” (see gpus in pandemic). So prices immediately will rise across the economy. In actuality, some goods with flat demand (like necessities bread and stuff) won’t rise due to doubling of money that much, but rare stuff will more than double.
On average everything will double, but it will differ product by product.
With savings it’s why I included “closed system”. Yeah, some money will go to savings (again, as in covid), and will slowly bleed out back into economy. Some will be spent in financial gambling, inflating prices there.
Ok, so it’s the companies that choose to increase prices to make more money. They can keep selling the bike for $100,000 but they choose to sell it at $300,000.
But that doesn’t have to happen. If the govt. said “no, you can’t just increase the price”, then the bikes would sell at $100,000 via like a first come first serve or a random lottery or whatever.
And for essentials you can just divide the stuff like bread among everyone to ensure no one starves or dies.
Like, that would just be a fairer way to do things.
But, if I’m understand your point of money as measurement, that would mean you get $100,000 times the number of bikes sold as the “economy number” instead of $300,000 times that, which is bad)
Mega eli5: imagine a measuring tape with notches for each billion in economy, and you measure amount of stuff in economy by this tape. If you increase amount of notches by 2, but still measuring exact same thing (same size of economy), you will receive doubled results on any measurement you get.
