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Culture War Roundup for the week of November 7, 2022

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Inflation is defined as an increase in the general price level.

Yes

The price of something is determined by the ratio between the value of a dollar and the value of that thing. (?)


No. It's determined by demand and supply. Internalizing this fact is as important as internalizing 2+2 to understand math, as is for economics.

The value of a dollar comes from, er, somewhere? You need dollars to pay taxes? Everyone else wants dollars so you want them to trade them with those suckers who want them? Something about oil?


It comes from demand and supply in the forex market. In the goods/services market its a proxy for all goods and all services and all labor exchange rate for one another, that can be stored for future use.

The government can "dilute" those dollars by printing more, in effect taking value from everyone who holds dollars, or "concentrate" dollars by destroying them?


Yes.

The government can also borrow money, but I have no idea about the effects are of government borrowing so I'm going to ignore it


When there's inflation, the profit-maximizing behavior is to raise prices. When there's deflation, the profit-maximizing behavior is to lower prices


Depends on the price elasticity of the good.

People are irrationally unwilling to lower their prices, so deflation leads to people making less profit, which makes them worse off, so the government really wants to prevent deflation and will tolerate some inflation if that's what it takes


No. This depends on the good and the market. There are many things that are (were) deflationary.

Everyone knows the government can't make sure inflation is 0, so instead they try to make inflation be about 2%, so even if they mess up and miss that goal by a little at least it's better than deflation.


Deflation isn't bad.

It's bad according to Keynes, and if you have certain goals as the central bank.


Strongly suggest reading any Macroeconomics textbook. Any would work given the fundamentals of macro are so fundamental...

If you want a more "based" theory of Economics, Basic Economics by Thomas Sowell is a must read.