How does excess money in the economy bring inflation?

Question

amistre64 · Answer

When people have more money to spend, they care less and less about price;  the demand curve for items increases which rises the equlibrium price higher and higher.

Simpy put, when you got alot of money, its worth is devalued and you treat it recklessly.  When people dont have alot of a rationing device, they use it sparingly

a_clan · Answer

The economy 'inflates' because too much money enters into the market. In such situation, people will have more money to spend on commodities, which results in shortage of goods if not replenished. This creates an imbalance between the demand and supply. Higher demand for goods and its shortage, will result in high prices.

anonymous · Answer

More simply put : If the economy produces this much of goods and accordingly you have the equivalent in terms of money. All else being equal, if you increase the supply of money without a concurrent increase in goods, you will end up needing more money to purchase an average good. Last thing to notice : this reasoning follows the understanding of Milton Friedman and al's school; because at the end of the day it comes down to a question of schools.

anonymous · Answer

The more money there is in circulation, the less the money is worth. This makes the price of things go up. Usually things will balance themselves out though.

anonymous · Answer

We must not forget that demand (money) is balanced by capacity. Money alone does not increase prices. The relation to industrial capacity (supply) is important. The greater the mechanization and automation (efficiency) the less the money supply can affect prices. This is how supply stays ahead of demand in a modern economy. This is also why green tech is so important to keeping prices competitive. Non Green such as fossil fuel is limited and inherently scarce or can be falsified as scarce in order to jack up prices/profits. Recycleable and renewable resources hold the best opportunity for price stabilization; though also limited, their recycleability makes them virtually infinite, which is bad news for the people who like to dig holes in the ground, ie.,mining -petro sector.