Good question. There are some key elements of behavior that are central to macroeconomics, specifically inflation. Inflation is, in a sense, an imagined concept, as a large portion of it is the velocity of money by means of consumption. When people know or believe there to be inflation, they understand that prices will be higher in the future and their money worth less, thus they are incentivized to spend it now, contributing more to inflation. The idea of societal standards however is a little more vague. It is certainly plausible that as the quality of life and accompanying standards rise, people are inclined to increase their level of consumption to match these extravagancies, leading to demand-based inflation.
how much of an impact does psychology and societal standards have on some aspects of inflation? - ryan kim
Good question. There are some key elements of behavior that are central to macroeconomics, specifically inflation. Inflation is, in a sense, an imagined concept, as a large portion of it is the velocity of money by means of consumption. When people know or believe there to be inflation, they understand that prices will be higher in the future and their money worth less, thus they are incentivized to spend it now, contributing more to inflation. The idea of societal standards however is a little more vague. It is certainly plausible that as the quality of life and accompanying standards rise, people are inclined to increase their level of consumption to match these extravagancies, leading to demand-based inflation.