Principles of Macroeconomics / Unit 6 MAC 0517 short lesson, about 20 seconds
Blurred Price Signals
Captions available
The idea
Prices carry information about scarcity, and inflation is noise on the line. A higher price may mean that one good is scarce or that every price is rising.
In practice
Buyers and sellers cannot tell which, so they respond more slowly and less accurately.
Where people slip
This is why inflation has a cost even when incomes keep pace: the market does its sorting job worse.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
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