Theoretically, there is a supply and a demand, and they are brought together only by price. Obviously, both are important because when they get drastically out of whack, inflation rises or falls—or deflation develops. For this reason, it’s useful to separately monitor their developments in real-time. To fully appreciate the underlying source of inflation, one needs to acknowledge the status of “both” supply and demand. It could be too much demand or too little supply. Often, it’s a bit of both.
Apr
11
2022