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Another follow up question. I was asking my brother about this. He had some insights that were helpful. But he made a comment that didn't make sense to me. He said that businesses don't like deflation. I could understand huge deflation in a short period of time; that would make it difficult to estimate the price a which you need to sell. But
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[quote user=" jmorris84"] Inflation = Increase in the money supply Deflation = Decrease in the money supply [/quote] So if I get what your saying, the Federal Reserve prints more currency, thereby diluting the buying power of the dollar. At the same time, the governments regulatory policy as well as subsidies mess with the cost of a particular
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jmorris84, hey how do you add quotes to your repsonse. I haven't figured it out yet. Thanks,
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As I understand it, the CPI is an attempt to value the dollar. So each calculated CPI figure is an estimate of the real value of the dollar. Consequently, there should be periods were the calculated values are higher or lower than the real value. When it shifts lower, we conclude there is deflation.
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I'm just starting to figure out economics. In the last couple of days, I have trended the historical CPI and noticed that prior to 1955 there were periods of both inflation and deflation. In fact, the overall inflation since 1913 isn't that great. However, since 1955 there have been no periods of deflation. This is curious to me, since statisitics