General Price Level and Inflation
I turn now to what I have always thought are among the most difficult topics in economics, the concepts of the general price level and inflation. Inflation is, and always has been, easy to define as a rise in the general price level. But, what is meant by the general price level and what are its determinants? Of the two questions, the first is logically prior, for one has to know what the general price level is before changes in it can be discussed. The real task, accordingly, is to come up with a definition of the general price level that is fruitful for further analysis.
KeywordsAsset Price Aggregate Demand Natural Rate Purchasing Power Current Income
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