A Look At Inflation

Recall from the equation of exchange that:

MV = PY

where M is money, V is velocity, P is the price level, and Y is real output. Therefore, when written as growth rates (assuming velocity is constant):

Inflation = Money (M2) growth – Real GDP growth

Inflation is thus graphed below:

inflation.jpg

The graph begs the question, “where are the inflation hawks?”

One response to “A Look At Inflation

  1. Pingback: Some excerpts on the slow recovery: In trying to account for why this recovery has been so poor, it’s useful to first consider several important factors that have before supported most economic recoveries. By this I actually do not mean anything tha

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