<p>The growth of the amount of money in the economy is just one factor that can affect inflation. Other factors include:</p>

<ul>
<li><p>changes in a nations productivity</p></li>
<li><p>changes in the exchange rate with other countries</p></li>
<li><p>changes in the velocity of money</p></li>
<li><p>changes in what fraction of financial exchanges are counted in inflation incidences</p></li>
</ul>

<p>Given all these additional factors, its no surprise to find that in the short term the money supply does not correlate brilliantly with inflation... but in the long term the correlation is definitely there - i.e. if the money supply grows by a factor of ten over many years, then prices would probably grow by a similar factor. Milton Friedman won his Nobel prize for his work highlighting the long term correlation.</p>

CC BY-SA 3.0
2016-12-11T16:15:14.913Z
2016-12-13T09:31:56.737Z
2016-12-13T09:31:56.737Z
Mick
<p>Does inflation rate during the years comes from the the proportional difference of current amount of currency and amount of currency 1 year ago.</p>

<p>I mean lets suppose in 2000 there were 1 million dollars in flow and in 2001 100k were added into the flow, so the inflation rate is 11%?</p>

CC BY-SA 3.0
2016-12-12T11:16:05.327Z
Following policies may affect the inflation too, e.g. if interest rates increase a few percent of the extra money supplies,  it may "curb"  the liquidity of the money available, hence, reduce the inflation rates. If nothing is done, then money supplies will be the direct causation for inflation.
mootmoot
<inflation>
Does the inflation rate reflect only the change in quantity of money?
George
# Does the inflation rate reflect only the change in quantity of money?

(Asked by: username_0 on 2016-12-11)

Does inflation rate during the years comes from the the proportional difference of current amount of currency and amount of currency 1 year ago.

I mean lets suppose in 2000 there were 1 million dollars in flow and in 2001 100k were added into the flow, so the inflation rate is 11%?

**Tags:** inflation
> **Comments:**
> **username_1**: Following policies may affect the inflation too, e.g. if interest rates increase a few percent of the extra money supplies,  it may "curb"  the liquidity of the money available, hence, reduce the inflation rates. If nothing is done, then money supplies will be the direct causation for inflation.  

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## 1 answers

### Answer by username_2 on 2016-12-11. Score: 2

The growth of the amount of money in the economy is just one factor that can affect inflation. Other factors include:

* changes in a nations productivity
* changes in the exchange rate with other countries
* changes in the velocity of money
* changes in what fraction of financial exchanges are counted in inflation incidences

Given all these additional factors, its no surprise to find that in the short term the money supply does not correlate brilliantly with inflation... but in the long term the correlation is definitely there - i.e. if the money supply grows by a factor of ten over many years, then prices would probably grow by a similar factor. Milton Friedman won his Nobel prize for his work highlighting the long term correlation.


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