In: Economics
If “inflation is always and everywhere a monetary phenomenon,” why did the huge expansions of central bank money supply by the Federal Reserve, the ECB, and the Bank of Japan between 2007 and 2015 not result in high inflation in those economies?
. Inflation up to a particular level is always a good thing it
doesn’t harm the economy even it is good for the investor and it is
good for the economy to expand the productive activities so
inflation is not always a bad thing but it is considered to be a
productive thing but only upto a particular level then after
inflation creates a very difficult situation in the economy.
Inflation is always and everywhere a monetary phenomenon but use
expansion of Central Bank money supply by the Federal Reserve and
the ECB and the bank of Japan between 2007 and 2015 not result in
high inflation India’s economy because here the money expansion is
related to the expansion of economic activities in a productive
sense the expansion of employment the expansion of basic
infrastructure and the expansion of new technology establishment it
is a case where people are considered to be a productive element in
in the development of the economy.
So in these economies the purpose of money expansion is only the
expansion of productive activity is not just to increase the money
supply in the economy because the concept of investment multiplier
and the money multiplier applicable when there is a chance of
investment and expansion in the economy.
The central bank of these economies providing the money for the
recoveries of the economy and for the purpose of maintaining the
price stability in the economy.