Monday, December 27, 2021

How did Larry Summers correctly predict inflation?

... I thought if you were filling a $30 billion hole [the insufficient aggregate demand necessary to get the US economy to full employment] with $200 billion of spending, there was likely to be some overflow and that overflow would translate into inflation. I did the same calculation essentially, looking at GDP, and I saw a 2% or 3% GDP gap, met with about 15% of stimulus. (LINK)
A lot of macroeconomics uses microeconomics tools like demand and supply.

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