Re: poly: Inflation

 phoenix@ugcs.caltech.edu (Damien R. Sullivan) writes:
>How does the economy growing "too fast" lead to inflation? Is it some

 An excessive increase in the money supply causes the value of money to
drop, and causes the economy to grow "too fast" by misleading people
into thinking they are richer than they actually are, because they are
slow to adjust their perception of the value of money if it has been
stable in recent memory.

 An increase in economic growth (not necessarily "too much" growth) causes
a decline in the value of money. Some reasons that come to mind:
 - people are less risk averse during good economic times, so the fraction
 of their wealth they want to hold as money declines.
 - people see more opportunities to borrow and invest (i.e. sell short) money
to use in creating more means of production.

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