Page 176 - TrumpsEconEra_Flat

8: MONEY - THE

SEEDS OF

DESTRUCTION

he Bureau of Labor Statistics defines inflation
Tas a pervasive and general rise in the average
price level. Inflation is always a monetary
phenomenon—when the money supply increases more
than goods and services increase; we experience
inflation. The three factors that influence prices are the
velocity of money (V), the quantity of money (M), and
the size of our GDP (Q), therefore P = MV/Q.

WHOM DOES INFLATION HURT?
Inflation hurts persons with fixed incomes the
most and flexible incomes the least. The elderly tend to
have fixed incomes whereas the young can adjust.
Savers lose if prices exceed the interest rate and lenders
gain. Negative real returns will encourage savers to

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