Akvod on 08 May 2010
| SamuelRSmith said: But, inflation will still be a problem. Increased deficit spending, for example, will result in an increase in money supply. Increasing the money supply in itself is inflationary as it will almost certainly result in a fall in the value of money. |
Did you take a look at the graph? The aggregate price level goes down, and as long as our government doesn't engage in excessive inflationary policies, then it should be back at its pre-recession levels.
Increased defeceit spending doesn't increase money supply... the Fed doesn't provide the government money, the government engages in extremely little seniorage. Expansionary monetary policy (lowering the rate) increases the money supply.
