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sol


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61 2024-05-20 11:53

>>59

The purpose of maintaining a low inflation rate is to encourage people to spend their cash into investments;

If the perceived return on investment of a given product is higher than that of cash, people will be incentivized to invest their money regardless of the inflationary environment.

when there is a zero inflation rate, people will hoard cash in the bank over many decades, this outcome contributes to low cash liquidity within the economy.

Targeting for 0% inflation rate does not necessarily mean ceasing to print money. If people "hoard" cash and reduce the total amount of currency in circulation, that is when you would print additional currency to prevent deflation. This way, the supply of money in circulation and the amount of goods and services available would increase in tandem.

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