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How does inflation correlate with more savings vs more spendings? (lemmy.nz)

submitted 11 months ago by [email protected] to c/[email protected]

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A recent article: https://www.stuff.co.nz/business/money/301022706/prepare-to-find-another-70-a-week-to-get-by-in-2024-asb

says: ..if households decided the worst was over and started to feel more confident about spending, it could push up inflation

But I thought it was the opposite;

More spending means more demand means more supply, which means production costs go down (due to economies of scale)… so inflation goes down?

But saving means less spending, means less demand, means less income for business, means costs go up.. so inflation would rise?

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[–] [email protected] 1 points 11 months ago (1 children)

So basically, less spending will decrease inflation in the short run. What about the long run?

[–] [email protected] 3 points 11 months ago (1 children)

Prices are sticky but the rate of inflation slows. Hopefully at least. You don't want to slow spending down so much so as to cause a recession, it's a fine balance.

Given how long term an issue like inflation is, trying to tame it is a relatively new experience/adventure for humanity.

[–] [email protected] 1 points 11 months ago

Mhm, I see. Thank you for your answer 👍.