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Inflation Defined
- Inflation occurs when money supply growth surpasses economic growth, decreasing purchasing power.
- This involves factors like printing money, loaning, devaluation, money velocity, and confidence.
Benefits of Inflation
- Moderate inflation can be positive, encouraging investment and spending.
- Different countries have varying inflation targets, like 2% for developed economies and potentially higher for developing ones.
Cantillon Effect
- The Cantillon Effect describes how new money's impact isn't uniform.
- Those closest to the money injection benefit most, investing before widespread inflation.