Re: how does economics explain stagflation?

On Wed, 20 Apr 2005 21:24:27 -0400, "anon" <me@xxxxxxxxxxx> wrote:

>most economists tie inflation to wages.
>
>but labour is just another factor of production.
>
>why don't they consider land prices for example as other source of
>inflation?
>evidence suggests inflation first hits land price before it reaches wages.

That is true in a sense. Inflation results from increasing the money
supply beyond the level needed to maintain stable prices. The
short-term effect of increasing the money supply too much is to
depress interest rates. Lower interest rates translate to higher land
values through the NPV equation.

-- Roy L
.

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