<p>No chance. The economy is heading for a deep recession, because of an exogenous fall in demand (think of a supply and demand graph, where demand falls drastically, and so Q and P falls). Recessions most of the time mean less inflation (firms sell less). Exceptions are called stagflation and are fairly uncommon, except in totally destroyed economies where inflation is a deep cause of the recession, like in Venezuela.</p>

<ol>
<li><p>numbers are most likely calculated by looking at needs, size of market, etc. In most cases these stimulus are <strong>funds</strong>. They are money to be put in a box and taken as needed. Not all might be used.</p></li>
<li><p>a lot of funds are targeted and not given directly as cash to people. In any case, people won't be spending the money as crazy, partly because there is little on which to spend it (no eat out, no holidays). Plus all the uncertainty about how long this will last make people averse to spend it. Wage costs are low and partly subsidized too so firms won't increase prices.</p></li>
</ol>

CC BY-SA 4.0
2020-03-24T15:36:19.707Z
2020-03-24T15:36:19.707Z
Danny_R
<p>I have a limited understanding of economy, however, I've been trying to catch up from various resources. Recently, the news are all about the enormous stimuli bills debated/implemented by governments all around the world to counterbalance the negative effects of the coronavirus. My question has two parts:</p>

<ol>
<li>First, where do those numbers come from? In the US they are talking about $2 trillion rescue plans, a number which I have no sense whatsoever for. In simple terms, which are the most important factors lawmakers consider when coming to this number (or, at least to the order of magnitude)?</li>
<li>Is it possible these stimuli will lead to hyperinflation? On the short run, the stimuli won't increase the productivity since businesses will still be closed. "Dumping" money on them will indeed help them from default, but with no underlying productivity I can't see how this extra liquidity won't boost inflation. In other words, the supplies are limited due to the reduced productivity, but now the demand will increase because everyone will have free cash in their hands.</li>
</ol>

<inflation><money-supply>
Can stimulus packages lead to hyperinflation?
Botond
# Can stimulus packages lead to hyperinflation?

(Asked by: username_0 on 2020-03-24)

I have a limited understanding of economy, however, I've been trying to catch up from various resources. Recently, the news are all about the enormous stimuli bills debated/implemented by governments all around the world to counterbalance the negative effects of the coronavirus. My question has two parts:

1. First, where do those numbers come from? In the US they are talking about $2 trillion rescue plans, a number which I have no sense whatsoever for. In simple terms, which are the most important factors lawmakers consider when coming to this number (or, at least to the order of magnitude)?
2. Is it possible these stimuli will lead to hyperinflation? On the short run, the stimuli won't increase the productivity since businesses will still be closed. "Dumping" money on them will indeed help them from default, but with no underlying productivity I can't see how this extra liquidity won't boost inflation. In other words, the supplies are limited due to the reduced productivity, but now the demand will increase because everyone will have free cash in their hands.

**Tags:** inflation, money-supply

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## 1 answers

### Answer by username_1 on 2020-03-24. Score: 1

No chance. The economy is heading for a deep recession, because of an exogenous fall in demand (think of a supply and demand graph, where demand falls drastically, and so Q and P falls). Recessions most of the time mean less inflation (firms sell less). Exceptions are called stagflation and are fairly uncommon, except in totally destroyed economies where inflation is a deep cause of the recession, like in Venezuela.

1. numbers are most likely calculated by looking at needs, size of market, etc. In most cases these stimulus are **funds**. They are money to be put in a box and taken as needed. Not all might be used.
2. a lot of funds are targeted and not given directly as cash to people. In any case, people won't be spending the money as crazy, partly because there is little on which to spend it (no eat out, no holidays). Plus all the uncertainty about how long this will last make people averse to spend it. Wage costs are low and partly subsidized too so firms won't increase prices.


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