In general, does an excess supply lead to inflation? How so?
415136
YES and NO..here's why...excess supply in the short run leads to price drops as the market responds to find a new equilibrium. Inflation and supply generally have an inverse relationship. UNLESS we are talking about the supply of MONEY, as dictated by the Fed Funds rate. Lower interest rates generally signal that the Fed expects to experience inflation in the near future, so they raise the rates and shrink the money supply. The same is true of the opposite. If they expect recession, they may lower rates and make it easier to borrow money. This is known as MONETARY POLICY.\nI hope this helps
623281
Well there are a lot of things inflation will affect but some of the notable ones are \n\n1. Price of Chinese products.  They won't be as competitive as other developping nations  Also as the price of Chinese commodiites rises, products from USA will gain an advantage in the long run. This is because inflation will make the price of human labor go up and that is one of the biggest contributing factors to a hike in price of final product. \n\n2.  The currency YUAN is currently pegged and this causes a lot of stir amongst developped nations.  This is because no matter inflation or not, the price of YUAN does not fluctuate too much.  This is done to off set inflation.  This makes Chinese products competitive even though inflation is taking place. \n\nNow obviously since their currency is pegged to the dollar the USA is always demanding that the Chinese UN-peg the YUAN.  But this has had very little effect and it's always a cause for tension between the two countries.\n\nThere are lots of other things that if affects but the two reasons I mentioned above is basically the root of all problems in international trade with China.
662029
inflation arises when there is surplus funds in circulation. when bank rate decreases more and more people take loans and all and then the surplus of money will be circulated among public. by adjusting interest rates government can regulate the inflation to an extent.
1186988
No, not entirely.  However, a gold standard would eliminate a lot of the incentive to create the types of inflation we've seen in recent history.\n\nInflation comes when the money supply is expanded while the supply of goods and services holds constant.  You end up with more money chasing the same amount of goods, so prices expand upward.  That's the side of inflation we see.\n\nIn a fiat money economy like we have now, the government or the central bank can expand the money supply at will, and inflation can develop.  Since the government benefits from effectively printing up more money, there's a lot of incentive to inflate and disrupt people's lives.\n\nOn the other hand, a gold-standard economy leaves far less room for government or central bank manipulation, and therefore inflation would seem less likely.  On the other hand, there were cases of inflation during times like the California Gold Rush, when lots of new gold came onto the market.  On balance, however, I'm still inclined to think that the gold standard would be more dependable than putting my faith in government bureaucrats to stabilize my money.
152394
the main cause of inflation is the government increasing the supply of money. But it is a little more complicated than that.  When the price of oil increases, the costs of everything that depend on oil also increase, for example. That then causes an increase in prices charged to workers. Workers then demand increased wages to maintain their standard of living. Employers give them higher wages without too much fuss because they know that they can pass the increased costs on to consumers.  The government facilitates all of this by printing more money. The government loves inflation because they borrow a lot of money at fixed interest rates. If they can cause the value of the dollar, peso, pound, euro, or whatever to decline they do not have to pay back all of what they borrowed. A neat trick and used successfully by all governments. Inflation also increases tax revenue.  If a person buys a share of stock for $100 and ten years later sells it for $200, he has to pay taxes on $100.  But if the inflaction rate is 4%, he actually made only $52. So the government makes out like a bandit again. The same goes for all borrowers.  \n\nOn the other hand those who lend money are loosers. Consequently, inflation tends to dry up the sources of capital. It is better to spend your money than to save it. Hence, that is why people have not been saving money since 1999, because Greenspan reduced the interest rate to 0. People are not as stupid as the government is.
615592
when oil prices go up, It costs more to make & deliver goods. In turn the price of goods go up. Hence inflaton.
182904
that demand drives supply and supply affects price
808497
Oil prices are not very elastic.  Once demand exceeds supply, the price will skyrocket.  Excess production capacity is marginal supply that comes into play when the price goes up.  It may be a well that costs more to operate until oil is at $70 a barrell.  If demand is really great, then this capacity is used up.
269409
Government spending puts more money in the economy . . . but tht doesn't NECESSARILY have an eefect on inflation.  Government BORROWING (i.e. deficit spending) does create inflationary pressures.
1159449
The concern is inflation and rising prices.  Most of it can be pegged to gas prices.  The high price of gas works its way into the prices of all things.  One way to help slow inflation is to raise the interest rates.\n\nGrowth is good, of course, but inflation can lead to uncontrolled growth, which is not necessarily good.
447309
An expansionary monetary policy is one in which interest rates are going down. This has the effect of expanding the supply of money, since money is easier to get. A tightening of the money supply is when interest rates rise, a situation we've been in lately. When interest rates are high, this will increase your monthly mortgage payment on your house. When interest rates are low (during a time of expansionary monetary policy), your monthly mortage payment for your house will be lower. In the past, when interest rates have risen, we've seen the price of houses fall a bit so that buyers could afford them. However, we haven't seen the price of houses go down lately, even though interest rates have been rising.\n\nThe Federal Reserve Bank of the US formulates monetary policy and can effect interest rates. It tries to fight inflation by raising interest rates, and tries to perk up the economy by lowering interest rates. Home buyers are affected by interest rates because they borrow money (get a mortage) to purchase a house.
341232
because most work places do not consider Inflation as part of a common pay raise.  If inflation rises up 5% and your pay raise is 1 - 3%.\n\nYour uphill battle begins.\n\nInflation is NOT always considered a bad thing but a process that assists finaicial markets.
426382
No, that led to all kinds of perversions of market forces in the past. Liquidity is also an issue. \n\nIf it ain't broke, don't fix it.
622944
Why because if the government just printed more money then inflation would occur and it would cost 10 million dollars to buy bread.  Check out what happened to Germany during WWII.
591773
Do you have a specific example?  If you're talking about the current day, it's raising interest rates because GDP growth last quarter was above 5%.  CPI was up more than expected.  These point to inflation, so it's raising rates to combat inflation.\n\nThe only thing is that consumer confidence is down, but that's consumer confidence only.
474948
Well, it won't run out completely, but it is projected that demand will outpace production within that time frame.  This is based on Hubbert's Curve and if you're interested, try researching Peak Oil.  Regardless, when demand outpaces consumption, expect the price of gasoline, and anything else associated with petroleum, to increase in price drastically.
130022
In the usa currencies are no longer backed by gold, it ended in the 1930's or 1960's i think.  It is now backed by the good faith of the usa government. Printing too much money would cause inflation for what one pays for good or services.\nThink of money like barry bonds rookie card.  If someone started dropping them from planes and passing them out at walmarts until everyone has one the value of the card would deflate because of supply and demand, now, imagine i want you to plow my driveway, are you gonna do it for a barry bonds rookie card knowing that everyone in the country has one. The world bank sets the amount, along with federal reserve and treasury department.