>>16881359>>16881368Hope y’all niggas are still here. I’ll try to break it down as simple as possible. One way to look at inflation is the ratio of money in circulation (amount of money people are able to spend) vs a country’s GDP (the amount of goods and services people can buy with the money in circulation). If you’ve ever heard somebody say that the federal reserve targets 2% inflation every year it’s for a reason. Because the fed expects the country’s gdp to grow by 2% so you’d want the extra money in circulation so people can pay for the new goods and services. You want a sufficient amount of cash flowing through the economy. What happened during Covid though was that most businesses were forced to shut down which means they weren’t producing which also means gdp was either stagnating or decreasing. At the same time the government was pumping all this money into the economy via unemployment and other types of financial relief. So people had all this money that they were spending while our production was light and we were starting to have supply chain shortages. So increased money supply plus decreased production equals increased inflation. What happens when you’re a business owner and you have a shortage of your products but demand is increasing because people have all this extra money? You raise prices.
>t. Graduated recently with an Economics degree but this is how one of my professors explained the current situation to me. 