Thread: wealth and inflation

Okay. I have this problem.
If wealth goes up, supply of bonds goes up, because borrowers know they'll be able to pay back; and demand goes up because people can invest. the result is that bond quantity and bond price both go up. (if you plot the graph you can see it). Okay. Now, what about inflation?
In my notes, I wrote that if wealth goes up, so does inflation. Why? Thanks.

Originally Posted by 0123

Okay. I have this problem.
If wealth goes up, supply of bonds goes up, because borrowers know they'll be able to pay back; and demand goes up because people can invest. the result is that bond quantity and bond price both go up. (if you plot the graph you can see it). Okay. Now, what about inflation?
In my notes, I wrote that if wealth goes up, so does inflation. Why? Thanks.

This may help. Look under Causes.