Wednesday, December 18, 2013

Why does the US Federal Reserve consider a 2% rate of inflation to be the sign of a healthy economy?

Moderate inflation is a byproduct of a healthy economy, not the cause.
A healthy economy is one that grows.
Increased population, more jobs, growing cities, larger commerce - these are good things.
To accommodate for the increased growth, the Federal Reserve prints more money. When you print new money, you dilute existing money, causing inflation.

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