How can government spending affect inflation?

1 Answer
Dec 28, 2015

It depends: if the monetary emission is bounded with the real amount of resources the inflation doesen't increase.


I will explain: For example, in the U.S.A there is a massive corn production. If the U.S Government (FED) decides, trought monetary politics, a monetary emission coherent to the corn production the level of inflaction doesn't increase. If the monetary emission is "too big" the inflation increases. But the worst danger in economics is not inflation but deflation, when the monetary emission is exiguous. For example a situation of deflation is in EU economy in this time.