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- From: thf2@ellis.uchicago.edu (Ted Frank)
- Newsgroups: sci.econ
- Subject: Re: GM Plant Closures Again? Won't Solve the Economic Problems
- Message-ID: <1992Dec17.220638.2850@midway.uchicago.edu>
- Date: 17 Dec 92 22:06:38 GMT
- References: <BzEqMA.D9z@apollo.hp.com> <BzEzv6.HHA@usenet.ucs.indiana.edu> <JACKSON.92Dec17154850@kaos.stsci.edu>
- Sender: news@uchinews.uchicago.edu (News System)
- Reply-To: thf2@midway.uchicago.edu
- Organization: University of Chicago Computing Organizations
- Lines: 25
-
- In article <JACKSON.92Dec17154850@kaos.stsci.edu> jackson@stsci.edu writes:
- >A naive question.
- >
- >If INFLATION is defined at the overall price level rising
- >Then how can that occur without an increase in the money supply?
-
- With either (1) a decrease in the amount of goods available, or
- (2) an increase in the velocity of money (i.e., how fast the money
- gets spent -- say I have $100, which I put in the bank; person B
- borrows that money, buys goods from person C; person C deposits the
- money in the bank, which then loans it to person D, etc.)
-
- Or, it could just be bilateral agreements among everybody -- if
- unemployment is low, workers can extract higher wages from their
- employers, who then raise prices. In 1987, New England was in this
- sort of situation. New York City has a sort of inflation about it --
- they use the same dollar bills, but they're unquestionably worth less
- in value than the same dollar bills in Houston. But because it's
- difficult to move an empty apartment complex from Houston to New York,
- shortages remain in NY while surpluses remain in Houston, and the latter
- will have lower prices.
- --
- ted frank | thf2@ellis.uchicago.edu
- standard disclaimers | void where prohibited
- the university of chicago law school, chicago, illinois 60637
-