Money inflation

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Austrian View: Inflation:Austrians believe that price increases are caused by excess demand. If the demand for goods and services increases, the price level will also increase. Therefore, the government attempts to maintain price stability using a price index which is an indication of the general price level. View: Inflation:According to the Federal Reserves website, the Federal Reserve Board sets the policy of the U. Government with the goal of promoting maximum employment, stable prices, and moderate long-term interest rates. Government uses monetary policy to affect the price level. Austrian views: Inflation is an increase in the general price level. An increase in the money supply reduces aggregate demand, which causes prices to generally increase. Therefore, a government should attempt to keep the price level as low as possible by regulating economic activity and by attempting to increase production. The Austrian theory states that while the government wants to maintain a stable price level, it does not want to go so far as to cause inflation by raising taxes and cutting back on spending. Taxes are used to reduce the demand for goods and services. In order to maintain price stability, taxes should be lower than the price level. Austrian View: Inflation:Austrians believe that price increases are caused by overproduction of goods. Therefore, the government attempts to keep price stability using a price index which is an indication of the general price level. Therefore, a government should attempt to keep price level as low as possible by regulating economic activity and by attempting to increase production.

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