Inflation: Difference between revisions
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In the 20th Century the most used definition was "an increase in the amount of money and credit relative to the amount of goods available" thus causing an increase in the price of goods. | In the 20th Century the most used definition was "an increase in the amount of money and credit relative to the amount of goods available" thus causing an increase in the price of goods. | ||
In the 21st century the meaning of inflation is most commonly used to describe an increase in [[consumer prices]] (caused by an increase in the money supply). | In the 21st century the meaning of inflation is most commonly used to describe an increase in [[consumer prices]] (caused by an increase in the money supply). | ||
Critics argue that this latest definition is confusing, especially for the needs of Bitcoin and Cryptocurrencies, since it is easy to measure [[money supply]], whereas [[consumer prices]] can only at best be estimated. Mainstream economics does this through statistical indices such as the [[CPI]] which aggregate average prices of a basket of representative goods intended to be similar to the recurring expenses of average consumers. Changes in methodology, political influences and changes in consumer behavior however make such statistics increasingly problematic. A change in the composition of the basket used can yield very different CPI estimations. | |||
Revision as of 18:15, 6 January 2016
Inflation is according to the classical definition "an increase in the money supply" That is "inflation or expansion of the stock of money".
In the 20th Century the most used definition was "an increase in the amount of money and credit relative to the amount of goods available" thus causing an increase in the price of goods.
In the 21st century the meaning of inflation is most commonly used to describe an increase in consumer prices (caused by an increase in the money supply).
Critics argue that this latest definition is confusing, especially for the needs of Bitcoin and Cryptocurrencies, since it is easy to measure money supply, whereas consumer prices can only at best be estimated. Mainstream economics does this through statistical indices such as the CPI which aggregate average prices of a basket of representative goods intended to be similar to the recurring expenses of average consumers. Changes in methodology, political influences and changes in consumer behavior however make such statistics increasingly problematic. A change in the composition of the basket used can yield very different CPI estimations.